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ECONOMY | 19-03-2022 19:16

War in Ukraine has Argentina reverting to protectionist playbook

Argentina's government is once again meddling in export markets, this time as a result of Russia’s invasion of Ukrain.

Agricultural powerhouse Argentina is meddling in export markets again as Russia’s invasion of Ukraine fans food inflation, providing the perfect cover for a rekindling of protectionist tendencies.

The ruling coalition that took office in 2019 is packed with officials who support intervention in crop and beef markets to secure supplies and suppress prices for Argentines, 41 percent of whom live below the poverty line.

Angry farmers and a more market-orientated wing of the administration had largely kept interventions in check. But since the war in the top crop-producing Black Sea region upended global markets, protectionist policymakers in Argentina have come out swinging. 

If a decade of controls under previous governments led by current Vice-President Cristina Fernández de Kirchner and her late husband is any gauge, blocking exports and capping prices risk squeezing Argentina’s wheat, corn and beef production – and exacerbating global food tensions.

“This administration has constantly grappled between being something new and more rational versus being a continuity of the populist 2003-2015 period,” said Lucas Romero, director of political research firm Synopsis Consultores in Buenos Aires. “But it needs results on the inflationary front to survive, and it now has the war as justification to go and be protectionist.”

Timeline
March 3: The government announced a subsidy from exporters to domestic wheat-flour and pasta makers
March 13: It halted exports of soy oil with a view to hiking taxes on shipments after extending a similar subsidy programme
March 15: President Alberto Fernández promised a war against inflation as food prices soared 7.5 percent in February from January
March 16: Agriculture Minister warns beef producers that if they don’t comply with a domestic quota at subsidised prices, they won’t get export permits

Argentina is a top beef exporter, but having cheap ribs to barbecue at home is also considered a birthright by carnivorous locals, making that market particularly susceptible to government interventions.

Rising global feed costs is one obstacle to keeping beef prices in check, but the South American nation has another problem: A recent drought on the Pampas farm belt – later compounded by wildfires to the north – is threatening to reduce its cattle herd and, in turn, supplies to slaughterhouses.

“I’m taking this decision because of the war that’s pushed global food prices higher, which comes on the back of a crisis for our own ranching industry,” Agriculture Minister Julián Domínguez said this week on Twitter of the threat to ban exports.

To be sure, other governments are also trying to shield voters from the full force of global inflation. In neighbouring Brazil, President Jair Bolsonaro has been fighting against fuel price hikes. And in Europe, Serbia banned crop exports.

“This isn’t an issue that’s unique to Argentina,” said Sergio Berensztein, who runs a political consultancy in Buenos Aires. “It’s more generalised, but in Argentina you have the government trying to conceal difficult economic adjustments behind a nationalist narrative.”

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by Jonathan Gilbert, Bloomberg

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