Gradual easing of lockdown but a slow recovery

• Over the next three months, Honduras and El Salvador are expected to begin a gradual economic reactivation and an easing of lockdown. This will lead to a progressive increase in income earning opportunities, although the informal sector will continue to be affected for longer than the formal sector. Nicaragua will continue without restrictive measures.

• In rural areas, poor and very poor households will find themselves in the lean season until August, with few income opportunities. The beginning of the season of high labor demand in October will permit an improvement in the incomes of the poorest households, but this will be limited by the restrictions on movement that are likely to persist in some areas.

• Due to a forecast of above-average rainfall until January 2021, average Primera and Postrera crops are expected, with localized areas slightly below average as a result of weather events and pest infestation caused by excess humidity. However, white maize and red beans are expected to remain above average and above 2019 prices, reducing access to food for poor and very poor households.

• From June 2020 to January 2021, along with the gradual economic reopening, there will be a seasonal improvement in access to and availability of food in rural and urban households in the region, placing them in Stress (IPC Phase 2). The poorest rural households in the Salvadoran coffee zone and the Honduran dry corridor will be the exception as they will be in Crisis (IPC Phase 3) due to the accumulation of previous events, lockdown and the outlook for the period.

Due to projected above average accumulations of rainfall in the region during the entire period under review, a canícula within the normal range, and government support for agricultural production, the Primera harvest is expected to fall within normal values. The red bean harvest may even be above normal in Honduras, where production is being boosted in non-traditional areas during a cycle in which this crop is not usually so important. However, there may be slightly below average production as a result of climatic effects in localized areas such as El Salvador, which was already significantly affected by heavy rainfall accumulations caused by storms Amanda and Cristobal, and where some farmers will not be able to sow again (Figure 1).

The Postrera harvest is expected to be average to slightly below average, given the susceptibility of beans – the most important crop during this cycle – to moisture damage. Governments also plan to support increased production during this cycle by expanding the area of production.

The forecast of a more active than average hurricane season for the Caribbean basin, from June to November, is a factor that could alter the scenario described above.

In addition to the agricultural outlook, it is expected that over the coming months all countries will have gradually begun reopening the economy and reducing restrictions on production, domestic trade, and the cross-border flow of goods.

Despite this, prices – especially for maize and beans – are expected to remain high compared with the average for the last five years and with the previous year (Figure 2). It is also expected that, with the resumption of trade in other countries around the world, there will be a slight increase in demand for products from the region to its partner countries.

As a result, unemployment levels in the region will gradually start to fall. It is important to bear in mind that companies that survived lockdown will have to embark on a long recovery. In addition, wages will not return to pre-pandemic levels while trade and industry make adjustments to assist their economic recovery. This scenario in the formal and predominantly urban sector will also have an impact on the informal sector, which more households are expected to join as an alternative means of generating income. October is the beginning of the peak of the annual high labor demand season for commercial crops such as coffee, sugar and peanuts. However, there are population groups in the dry corridor of Honduras and the coffee-growing zone of El Salvador that have suffered a significant deterioration in their livelihoods due to past disruption to their production and, in turn, their income, and whose employment options will be limited by a slow economic recovery post-lockdown. Internal migration for daily wages will become easier as governments relax restrictions on movement, although migration between countries is not expected to fully resume in the short or medium term. These changes also apply to Nicaragua, where there has been a voluntary lockdown that has had an impact on all commercial activities, already affected by a socioeconomic crisis since 2018.

Although the flow of remittances will gradually increase as employment options for migrants increase in their countries of residence, a return to pre-pandemic levels is not expected since the main countries of origin (the United States, Spain and Italy) are those that have been most affected by health issues. In fact, World Bank forecasts for this year show a 19.3 percent drop in remittances for Latin America and the Caribbean, which is higher than the drop during the 2009 financial crisis. Since these flows are important for the economies of recipient countries and households, economic recovery will be slow and will continue until 2021.

No governmental humanitarian assistance is anticipated in Nicaragua or Honduras, despite the fact that food was distributed during April and May in the latter country. On the other hand, assistance from international cooperation agencies, particularly in the form of vouchers, is planned until August. According to the World Food Programme (WFP) Regional Report, only 10 to 20 percent of people reported receiving food assistance in May. In El Salvador, the government has not indicated how long current provision will last, but it is not expected to continue beyond June. In addition, WFP is requesting U$ 8 million to provide food assistance for two months to 153,500 people affected by tropical storm Amanda. This request is in addition to the US$ 19 million required to support the El Salvador government in its response to the pandemic.

Expected food security outcomes From June to September 2020, very poor households in Honduras and El Salvador, in both urban and rural areas, are expected to face difficulties generating income during the relaxation of measures to contain COVID-19. During this period, rural households – like urban households throughout the year – depend mainly on purchasing as a source of food until the Primera harvest in September. Of particular concern are the poorest urban households in the region, which will be very slow to make an economic recovery after the pandemic; households in the rural areas of the Honduran dry corridor afflicted by drought losses in 2019; and in the El Salvador coffee-growing zone. In a normal year, these households do not have reserves at this time; however, lack of reserves since 2019 has led to the early employment of coping strategies. In this context, lockdown significantly reduced their employment options and consumption, and led to abnormally high prices. As a result, these households are expected to be in Crisis (IPC Phase 3). In both countries, however, economic reactivation and the start of the Primera harvest are expected to increase food availability and lead to a gradual rise in income for the majority of the population. In Nicaragua, due to the fact that there are no government restrictions on trade, social distancing has been initiated by the population, and following the 2019 drought in some areas of the dry corridor, the poorest households are expected to be in Stress (IPC Phase 2).

October 2020 to January 2021 will see the annual season of high labor demand in export crops, and an increase in the availability of food on the market and in producer households, due to crops from the Primera harvest and the start of an average Postrera harvest. It is expected that restrictions on movement will have been relaxed by this period and there will be improved regional economic recovery as the resumption of commercial activities continues. Employment options are thus expected to increase compared with previous months, which will lead to a rise in incomes, particularly in urban areas. All of this will allow greater food access and availability compared with the previous period. Therefore, a large number of urban and, to a lesser extent, rural households in the three countries will remain in or improve to Stress (IPC Phase 2). The exceptions are the extremely poor rural households that depend on daily wages, located in the Honduran dry corridor and the Salvadoran coffee-growing zone, which will be in Crisis (IPC Phase 3). Day laborer households will face possible restrictions on their migration to coffee plantations. In addition, the prices of basic grains are projected to remain above average, meaning that households that are highly dependent on purchasing will have less access to food. This will lead to a food consumption deficit unless they use negative coping strategies. During the period under review, provision of food assistance is not expected to be sufficient to reverse these food security outcomes.