Wednesday, May 29, 2024

OP-ED | 16-03-2019 11:29

Editorial: Playing to your strengths

In the more immediate term the presidency of Mauricio Macri (whose Expoagro visit on Wednesday naturally plugged his re-election bid) is on trial.

Amid all the problems of a recession now lasting almost a full year (and with no end in sight to the stagflation after Thursday’s announcement of 3.8 percent inflation in February) countries and governments should also play to their strengths and perhaps Argentina’s biggest also featured in this week’s news – namely agriculture as showcased at Expoagro up the delta in San Nicolás, Buenos Aires province. An event deserving more media attention than it usually receives – the Rural Society exhibition in a fashionable area of the capital (Palermo) during the winter holidays normally steals the show within this sector yet Expoagro is not only bigger but also covers farming across a far broader spectrum than the Rural Society’s ranching traditions.

The farmer’s perspective is a curious blend of the short and long term – no five-year plans here when every harvest is so dependent on the weather (as so disastrously underlined by last summer’s drought) and yet the soil is always there as is the demand with no product having a faster built-in obsolescence than food once consumed. Equally the issues at stake in Argentine agriculture can be approached both structurally and cyclically.

In the more immediate term the presidency of Mauricio Macri (whose Expoagro visit on Wednesday naturally plugged his re-election bid) is on trial. The first half was almost entirely beneficial from a sectorial standpoint – 2016 was a year of negative growth for Argentina but good for agriculture thanks to the double booster of eliminating most export duties and a major devaluation within days of Macri’s inauguration, while 2017 was a positive year for the entire economy. But the second half of the presidency has a far more mixed record, even with every prospect of a bumper harvest in the near future – if 2016 gave the dual benefit of devaluation and tax breaks, 2018 carried the double whammy of not only the worst drought in half a century but also the return of export duties to meet the top priority of the “zero deficit” pledged to the International Monetary Fund (IMF). No wonder Macri called the continuation of agriculture a “miracle” on Wednesday.

Structurally, the relentless trend towards concentration continues. This is nothing new in a country which never had the equivalent of the 1862 Homestead Act in the United States to encourage smallholdings (except for a period in Santa Fe province). For much of Argentine history the social pyramid was built around huge estancias ranching cattle and when soy started replacing the traditional meat and wheat in the last decade of the past millennium, the so-called “pools” became the name of the game (a curious case of reverse feudalism with impoverished landowners leasing their hectares to multi-millionaire tenants). Nowadays the combination of a high tax burden including export duties, inflated costs and other overheads dictate the economies of scale, thus favouring concentration and technological innovation against the small farmer and farm hand. Throughout Argentina’s democratic life agriculture has always been a sector with a lot of money and few voters – a factor which conspires against politicians playing to the country’s strengths.

The export duties (four pesos per dollar earned, a “bad tax but in an emergency,” according to Macri’s own admission) mark a serious regression – when a government contradicts some of its own basic premises, there is a problem. Farmers complain all the time but it is interesting to note that the Trotskyist Workers Party has also criticised export duties as a tax on production, not income. Yet even more than punishing productivity, the damage to exports should be underlined when these account for little more than 10 percent of the economy and here agriculture is central. The official promotion video of Buenos Aires province highlights that it accounts for 55 percent of Argentine industry and a third of the agriculture and exports – these figures alone suggest that agricultural exports far outweigh the industrial. The latest trade figures show emerging markets moving fast up the importer rankings (with recently visited Vietnam and India in the new Top 10 along with Algeria) – typically countries with huge populations to feed and low industrial wages against which Argentina cannot compete. Perhaps Expoagro should add two letters to its name – Exportagro.

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