Financial expert on food security: “Shocks will continue to occur”

taz: Mr. Lario, you work with countries that are most affected by global crises. How worried are you about food security?

Álvaro Lario: At the global level, what concerns us most is food inflation. Global agricultural prices rose 13 percent between July and September, according to the Bloomberg Agriculture Spot Index. Inflation will continue to rise in the coming months. Due to the current crisis, oil prices have risen and with them transport costs. This also makes wheat, corn and so on more expensive. So when you go to the supermarket, the pasta costs more, we can all see that. But of course, lower income families are the hardest hit. In developing countries, this creates great pressure on politicians - and on the population groups that are falling behind. That's the first point.

Lario: Hunger. Almost 650 million people worldwide are currently affected by hunger. This number has decreased slightly, but it is still almost one in ten people in the world. That's a lot. Another number that I find alarming is that almost 2.7 billion people - almost a third worldwide - cannot afford a healthy diet. More and more people are buying processed foods and not fresh vegetables, fruits or plant-based proteins such as beans, peas and lentils because they are becoming more and more expensive.

is President of the International Fund for Agricultural Development (Ifad). This is a specialized agency of the United Nations that was created at the suggestion of the World Food Summit in 1974. Its central task is to mobilize resources to support small farmers and landless agricultural workers in order to improve food production and increase local incomes.

taz: The current oil crisis has revealed how dependent food systems are on fossil fuels, which are used, for example, to produce artificial fertilizer. What lessons are you drawing from this crisis?

Lario: It's not just about dependence on artificial fertilizers and oil, but also about dependence on trade. In Africa, for example, many countries are not self-sufficient in food. This is particularly strange since Africa has the land, skills and workforce to be self-sufficient. Still, the African Union recently found that the continent imports nearly $100 billion worth of food every year. There are also fertilizers and seeds. This makes it more difficult to react to global shocks.

Lario: Countries need to strengthen their structures in the areas of distribution, storage, production and processing of some food into higher-value products. This makes countries more resilient because shocks will continue to occur. We saw that. It could be Covid, the invasion of Ukraine, the blockade of the Strait of Hormuz, it could be droughts, heatwaves or floods. None of this will go away. That is essentially the task of the International Fund for Agricultural Development (Ifad). We are trying to create these structures, especially in the least developed countries.

taz: What role does it play how farmers grow food? Does it help to switch to sustainable agriculture that is not dependent on fossil fuels but is operated ecologically, such as agroecology?

Lario: We have a project in Benin that combines fly larvae with biochar to produce organic fertilizer. But it's not that easy to make it financially viable. For a small farmer to switch to agroecology, he needs three or four years to improve soil health - during which his capital flow is lower. After that, he could be even more productive and produce more nutritious products. But the farmers have to be paid for the period in which they make losses.

taz: Could agroecology – i.e. agriculture that also takes into account surrounding ecosystems such as forests or moors – feed the world in the long term?

Lario: I think it's an economic model that could work. But I wouldn't expect a complete change. The same gradual approach would have to be taken in agriculture as in the energy sector. Agroecology is an approach we promote, but we also understand that – particularly for small farmers and with regard to soil health – this cannot happen overnight. It's also about local ownership. It's about ensuring that small farmers not only practice subsistence farming, but also establish profitable small-scale production.

taz: Some small farmers fear that as the industrialization of agriculture increases, they will lose out to large corporations.

Lario: I don't think it's an either/or situation. We support both. Small farmers do not have the necessary critical mass; They cannot sell their products on the market or purchase resources at a certain price. We help them set up cooperatives, producer organizations and women's associations. A certain size is necessary to make farming economically viable. And more and more heads of state in Africa want value creation and more processing in their own countries. That creates jobs. Size matters as long as you don't focus on monocultures, which will ultimately become unviable sooner or later because they deplete the soil and reduce nutrient quality.

taz: Despite the drastic cuts in development funds, the German contribution to the International Fund for Agricultural Development (Ifad), which you head, has so far remained stable. What does the situation look like overall?

Lario: We can count on stable contributions from our most important donors. The countries in which investments are made have also increased their own contributions. They appreciate that we are trying to promote the local private sector and create jobs. It is a productive and investment-oriented approach rather than pure assistance. We also receive funding from the market, pension funds and investors who lend us money at a very low interest rate because we have a very high rating.

taz: Ifad was the first UN organization to enter the capital market in 2022 - and received an AA+ rating. Will this model replace public development funds in the future?

Lario: Official development assistance worldwide amounted to around 175 billion US dollars in 2025. If we only talk about subsidies in agriculture by developed countries, it was about 700 billion annually from 2019 to 2021. Remittances amounted to another 730 billion. Official development aid is therefore often greatly overestimated. As an institution in the development sector, we need to ensure that these funds act as a catalyst and attract money from the private sector because that is where the real money lies. In our case, we are mobilizing it for the “first mile” – where extreme poverty exists.

taz: With this model, investors need returns. Could this lead to a change in the direction of development - making it less about the people and more about the investors?

Lario: In our case it's all about the rural community. We issue bonds that combine attractive interest rates with very high creditworthiness thanks to our AA+ rating. If a country is in a debt crisis, we provide it with grants that are free to the country but require funding from donors. In all other cases, we grant highly discounted loans, for example at an interest rate of 0.5 to 0.75 percent over long terms of 30 to 40 years, depending on the country. If these countries were to raise the money on the market, the interest rate would be significantly higher. The model works.

taz: How do you achieve returns at these interest rates?

Lario: It is a mix of voluntary contributions from countries and lending to a number of countries.

taz: What argument do you use to promote voluntary contributions from states?

Lario: It is important to continue investing in development, creating stability and building resilient value chains. I would say more jobs and economic opportunities create stability, contribute to fewer conflicts, fewer wars in the future and less forced migration.

taz: You have already mentioned the high subsidies from the EU and the USA. What do you think are the biggest external factors hurting farmers in lower income countries?

Lario: We believe that subsidies must be constructive, for example to help farmers better adapt to climate shocks. Another point is that, in general, between all regional blocs – be it in Africa, Europe or Latin America – what we need above all is security and predictability. Some African heads of state and government are demanding that if the EU changes its policies - be it export bans or sustainability requirements - we should communicate this in advance so that we can prepare our markets for it.

taz: Some crises cannot be predicted, but we know the effects of climate change. The next crisis we face is a “Super El Niño.” Are there any steps you are taking to prepare for this?

Lario: The preparation has to start much earlier, namely in the investments that states make. For example, when we invest in Malawi, we know that the country is hit by cyclones every two years. That's why we take this into account when planning rural infrastructure.