Malnutrition And Food Aid Programs: A Case Study From Guatemala Page: 53

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In reaction to the report by Fasik and the GAO, AID (the Agency
for International Development) responded in a letter dated July 15,
1975:
The report reflects a strong "free market" orienta-
tion. Especially in regard to pricing, the report
should recognize that there is an inherent problem
of production variation and consequent price instability
in food commodity markets. It is unrealistic to expect
an unregulated free market to work satisfactorily in the
context of instability and scarcity.
The primary question arising from this discussion by AID, as to the
GAO's recommendations, is: What guarantees that the hungry will have
better access to food? It is doubtful that an agricultural policy
which involves higher prices will solve the hunger problem in an
economic system that, in general, shows signs of increasing inequali-
ty--that is, in a society where the poor are getting poorer.
Unequal Transfer of Currencies and the Balance of Payments
There are various arguments concerning food aid with respect to
the transfer of currencies and the balance of payments, as noted by
Bard (1972) and others. The complexity of this issue is further com-
pounded by the "terms of agreement" between the donor and recipient
nations. Furthermore, these terms vary greatly from one country to
another. Therefore, with this in mind, the following is an attempt to
deal, at least briefly, with each of the three major aspects.
First, it is argued that generally certain conditions are tagged
to food aid (PL-480) which include the transfer of donor's (U. S.
dollars in this case), local and other foreign currencies from recip-
ient to donor nations which, in turn, are used to pay off the donor's