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ECONOMY | 16-03-2019 08:56

Positivity reigns in the pampas as agroindustry eyes rebound

Optimism was the name of the game at the annual ExpoAgro fair this week, with a bumper harvest anticipated and widespread support for President Mauricio Macri.

This week, Argentina’s farmers, industrialists and representatives from a host of corporations and groupings gathered on an old racetrack near the town of San Nicolás de los Arroyos, in the province of Buenos Aires.

The event, stretching over a complex of 200,000 square metres, was ExpoAgro, Argentina’s annual agricultural fair, where national and international companies set up hundreds of stands advertising new technologies, machinery and chemicals to the delight of the farming community.

The power of the agricultural sector in Argentina is often overlooked. As the largest contributing sector to the country’s GDP, its health carries a heavy weight. Thus, the atmosphere at this event was expected to be a strong indicator of how the farming community are feeling amidst an economic downturn – and to gauge how strong its support for President Mauricio Macri and his administration is, in this crucial election year.

The past 12 months has not been easy for Argentina’s farmers. They faced the worst drought in 50 years last summer, which dramatically reduced the harvest. As the world’s third-largest exporter of soya and maize, the poor weather shaved as much as one percent off Argentina’s GDP, experts estimate.

In addition, the sector was hit by an “emergency” tax on export grains – four pesos per dollar earned – after the government moved to reintroduce duties in the wake of a currency crisis.

Turmoil has also come from overseas, as farmers find themselves caught in the middle of a trade war between the US and China.

‘MIRACULOUS’

President Macri arrived in San Nicolás on Wednesday morning. He greeted the farming community with an encouraging speech, praising them for their ‘miraculous’ recovery and declaring: “I’m here because I believe in you and what you can do.”

“What the campo has done is a miracle. You have recovered from the worst drought in years and are heading for a record harvest,” he said.

For the president, it was important for this address to be well-received. Despite the agricultural sector having largely backed Cambiemos in the last elections, recent policies – such as the government’s four pesos per dollar export tax, introduced in September, have not been so popular.

In an interview with the Times, Guillermo Bernaudo, the Agriculture Department’s Cabinet chief, admitted that this was a important day for Macri’s political relations with the sector, yet he remained confident the president retained the sector’s faith.

“We could say that it was a dangerous thing to come here and to have the chance of somebody shouting or something like that, but nothing happened,” he said. “The shout which was loudest was ‘Aguante,’ or ‘Keep on going’. We know that farmers trust the government,” he said.

Bernaudo also vouched for the positive atmosphere at the Expo, attributing it to the record wheat harvest this year.

He also praised the stoicism of farmers, noting that “the drought last summer was very hard, the international markets for capital had some changes, especially with the Federal Reserve’s interest rates in the States.”

The government has also assured the farmers that its export levy is only temporary.

Questioned as to the impact of the tax, Buenos Aires province’s Agroindustry Minister Leonardo Sarquís admitted it had impacted farmers, but he reiterated the government’s line that they would soon be removed.

“It’s not definitive,” he told the Times. “The taxes will be implemented for one more year - no more than that. I think that the opportunities to continue growth and increase exports are great.’

Emphasising the sector’s bright outlook, Sarquis said that the strength of the industry today is testament to the decisions made by the Macri administration.

“For example, in the last two years we have had 57 new destinations for our wheat. We have also had great opportunities for corn and for meat exports. We not only have great opportunities in China, but also in Latin America.”

INVESTMENT

Numerous banks were present at the exhibition, offering credit in dollars to farmers wishing to buy machinery, technology or varieties of seed. In his speech, unveiling a new policy, Macri promised two credit lines for farmers, available through the BICE (Bank for Investment and Foreign Trade, or Banco de Inversión y Comercio Exterior).

It seems that the economic crisis hasn’t had much effect on the amount of foreign investment into the industry, either.

Corporations from 10 other countries – including Bayer (Monsanto) and the Chinese Bank ICBM – set up pavilions for the four-day exposition, building flashy stalls with small gardens planted with soya and maize in order to demonstrate the strength of their products and handing out free gifts to hoards of farmers, businessmen and the occasional poncho-clad gaucho.

The largest chemical producer in the world, German company BASF, is certain that investments in Argentina will pay off.

“Every year the market is growing,” said Teófilo Bustingorri, BASF’s director of marketing. “The agricultural business is one of the most dynamic markets in Argentina. Our perspective is that we invest because we foresee these opportunities. We don’t focus annually, we see it in the long term and we fork out for more than 10 years.”

“At the moment our most popular product in Argentina is HEAT, which is a herbicide for broad-leaf wheat and soya bean. We have sold nearly five million hectares in the last year… we have also added a whole new venture of soya bean seed this year,” he told the Times.

TRADE WARS

Argentina is the world’s third-largest producer of soya, with more than 60 percent of the country’s arable land taken up by the cultivation of the plant. In recent years, Argentina has become the number one exporter of soybean oil, primarily to India, China and Bangladesh. But this year’s US-China trade wars could be incredibly detrimental to the export of Argentine soy, especially when combined with the export tax.

Beijing has imposed retaliatory tariffs on US sales of soya beans, which, in turn, stranded millions of tonnes of soya beans in the United States, pushing down prices. This has made it more economical to crush the beans and export soya meal to Southeast Asia – undercutting Argentina’s industry in the process.

Bernaudo admitted to the Times that many farmers may suffer as a result. “We are thinking about the global situation and we know that wars in commerce are not very good… we hope that everything will quieten down,” he said.

Nevertheless, multinationals continue to be optimistic about their opportunities in Argentina. Don Mario, for example, is a multinational seed company which started 35 years ago in Chacabuco, a city in Argentina’s corn belt. These days, the company dominates South America.

“Don Mario has 52 percent of the market here in Argentina, 46 percent in Uruguay, close to 40 percent in Brazil – in Brazil we are the number one company in the soybean business,” Sales and Marketing manager Gastón Suardiaz told the Times.

Addressing Argentina, Suardiaz was positive in his outlook. “The sector is in a good place at the moment. It is a kind of bubble in Argentina. For sure the crisis has affected the sector because of currency and taxes getting worse for our clients, but in comparison with other sectors we are doing very well,” he added.

In times of crisis, the harvest can certainly be a source of reassurance, it seems, one that the economy – and perhaps the president – can rely on.

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Ellie Arden

Ellie Arden

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