Washington Post 2012-2-10 CAIRO — There is no more potent symbol of Egypt’s economic fragility than the pocket bread that is a staple of life here.
Every day, the Egyptian government allocates 25-pound bags of subsidized flour to designated bakeries to produce the Frisbee-shaped loaves, which Egypt’s impoverished and working poor buy for about eight cents per 10 loaves. But sometimes, there is not enough to go around.
While fertile land is abundant in Egypt, particularly along the Nile, the country relies on foreign producers for nearly all of its agricultural needs — including wheat. And though the state sets prices on basic goods such as bread and heating oil, when the cost of imported commodities goes up, the underground economy flourishes. Some bakers sell their flour allotment on the black market instead of making bread, prompting shortages, long lines and, sometimes, unruly crowds.
Egypt’s slide from breadbasket of the eastern Mediterranean to net grain importer is elemental to an economic crisis that threatens to convulse the nation. According to economists and farm experts, several factors are complicit in the decline: an Egyptian government that for years refused to build the infrastructure needed to produce wheat in a cost-effective way; a privatization drive that plundered Egyptian agriculture with ill-advised and often corrupt divestment deals; farmers who sold their fields to property developers or diversified into more profitable crops for export at the expense of grains; and the U.S. government, which promoted sales of American wheat in Egypt rather than encouraging greater self-reliance.
Today, Egypt imports about 80 percent of its agricultural products, and with a currency devaluation expected sometime this year, consumers are bracing for more costly foreign goods across the board. The country labors under a chronic balance-of-payments deficit. And inflation, already at 9 percent, is expected to increase in the coming months along with borrowing costs. Already, lines of motorists anxious about fuel supplies, another subsidized commodity, have been radiating from gas stations.
‘Everything starts with the farm’
In a country where 40 percent of the population lives on less than $2 a day, subsidized bread is considered a basic human entitlement. Efforts to lift price supports have fueled riots, most severely in 1977, when President Anwar Sadat was forced to reinstate them, and inexpensive bread was hailed alongside freedom and social justice as the clarion call of the revolt that deposed President Hosni Mubarak a year ago. But economic distress has only intensified since Mubarak’s ouster, raising the possibility of more social instability and violence.
“Everything starts with the farm,” said Mohammed Barghash, who chairs Cairo’s As-Salam Agriculture Association. “If a country is unable to provide its own food, it is not worthy of the name.”
Not surprisingly, most of the blame for Egypt’s food insecurity is heaped on Mubarak. Two of his last three ministers of agriculture are in jail, charged with, among other things, allowing tainted pesticides into the country and selling prime farmland to regime cronies for a fraction of its market value. “Hosni Mubarak killed Egyptian agriculture,” said economist Mohammed Gouda, who was raised by cotton growers. “It was not done by benign neglect. It was malign and corrupt.”
Throughout Mubarak’s rule, according to Egyptian farmers, the government failed to provide irrigation and electricity systems that are vital to the production of water-intensive crops, particularly in a desert country with a meteoric population growth rate.
A farmer who owns several thousand acres of land northeast of Cairo says his family managed to connect to an electrical grid just two years ago after relying for decades on costly generators. Even then, the Ministry of Agriculture did little more than issue the necessary permits. “We did pretty much everything ourselves, including the financing,” said the grower, who asked that he not be identified by name for fear he might need more permits. “There was no government plan.”
Deregulation, a hallmark of the economic reforms promoted by Mubarak, also had a negative impact on Egypt’s wheat belt. As free-trade deals in the 1990s unlocked new markets to Egyptian commerce, growers abandoned low-margin crops in favor of higher-value products such as fruit and cut flowers. At the same time, they succumbed to the call of rising property prices by selling grain fields to developers, often in defiance of zoning laws.
“There has been a lot of illegal building of homes on some of the country’s most fertile land,” said Wael Ziada, head of research at investment bank EFG-Hermes. “You can hardly blame [the growers] given the lack of incentives to remain on the land.”
The U.S. role
It was the U.S. government, in tandem with the International Monetary Fund and the World Bank, that strongly encouraged Cairo to liberalize its economy and expand its share of regional trade. Washington feathers the Egyptian-Israeli peace treaty it brokered in 1979 with generous allocations to Egypt of civilian aid, most of which is administered under the U.S. Agency for International Development, Washington’s humanitarian assistance policy arm.
Even as USAID has plowed well over a billion dollars into rural Egypt, mostly in the form of training courses and water-management programs, many farmers complain that the decline of Egyptian agriculture is as much an American failure as it is a local one.
In particular, they chafe at how the United States is one of the country’s largest suppliers of grain — bolstered by loan guarantees and other subsidies from Washington — even as the output of Egyptian farms diminishes.
“If the U.S. is the mother of democracy, it should go to the people and help them feed themselves,” said Barghash, of the agriculture association. “Yet still we import most of our wheat from America.”
E-mailed requests to USAID for comment were not returned.
Researcher Deena Adel contributed to this report.