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OPINION AND ANALYSIS | 23-05-2020 10:03

Agricultural food for thought

A protectionist model in an increasingly protectionist world conspires against the success of agricultural exports, even though more vital than ever.

Around for some eight millennia and predating any civilisation as humanity’s oldest economic activity, agriculture is absolutely central to both the image and reality of the Argentine identity – beyond all the gaucho stereotypes it accounts for some two-thirds of Argentine exports (around two-thirds of that two-thirds is primary produce).

Agriculture is cyclical like all business but its cycles are unique because they are also seasonal among other factors. Impossible to squeeze all the permutations into a page but along very broad lines it might be said that the wheel is curiously turning full circle in these post-normal times (Buenos Aires Province Governor Axel Kicillof dixit). Dominating Argentine farming in most of the last century, the traditional meat and wheat were displaced in its last decade by soy pools, which also disrupted the traditional rural hierarchy (a curious case of reverse feudalism whereby super-rich and technically endowed tenants leased land from its impoverished and often smallholder owners).

But after three decades of an Asian demand now past its peak, along comes the coronavirus pandemic pushing down the Chicago prices for soy and maize by up to 20 percent with the shrinking demand for biofuels and animal forage (plus the prospect of a record maize harvest in the Corn Belt in the United States), leaving a bullish wheat with increased acreage to pick up the pieces. As for meat, the beef export data defy conventional wisdom – after overseas sales accounted for a record 27 percent of all 2019 production in a year ending with the election of a government committed to placing “Argentine tables” first, beef exports in the first quarter of this year were almost 10 percent higher than the first quarter of 2019.

The second quarter might well be another story for all agricultural exports now that the parallel exchange rate is doubling the official this month (or even trebling it for farmers once export duties have been deducted), thus encouraging them to hold back – especially with the explosion of money supply auguring intensified inflation and devaluation (almost a necessity to keep pace with Brazil) in the second half of the year.

But it is not just monetary policy – a protectionist model in an increasingly protectionist world conspires against the success of agricultural exports, even though more vital than ever. The dice are loaded in favour of a highly concentrated and labour-intensive manufacturing industry against an agriculture scattered all over the country and grouping a modest percentage of the electorate even if the latter is more competitive. A world map of agricultural subsidies shows only Argentina and Vietnam penalising their farmers (to the tune of over two percent of Gross Domestic Product) while the rest of the world subsidises almost 20 percent of their agriculture on average.

Since people are much more adept at dodging taxation than products, export duties represent an easy way out but they are entirely perverse – they are not only opposed by the farmers themselves and those subscribing to a market economy but have even been criticised in the past by the Trotskyist PO Workers Party, which argues that it is wrong to tax production instead of income. Taxing production should indeed be banned from political discourse as quite literally counterproductive – the debate between left and right should be over how much agricultural income to tax.

Yet export duties might not be the only cloud on the horizon – proposals from government ranks include revival of the National Grain Board (1933-1991) and the agrarian reform pushed by picket leader Juan Grabois. Throughout almost six decades the general thrust of the National Grain Board was to keep farm prices low to help flour mills rather than high from overseas sales – if Argentine harvests were still only 30 million tons a quarter-century ago as against almost 150 million last year, technological advance might not be the only explanation. As for the agrarian reform of Grabois, it not only runs counter to the economies of scale but defeats its own purpose since breaking up large estates into smallholdings would only open more land for the pools.          

Time to look at the minister and the ministry. Agriculture, Livestock and Fisheries Minister Luis Eugenio Basterra, 61, has little in common with his rancher predecessor Luis Miguel Etchevehere apart from first name and portfolio, representing regional economies rather than the pampa productive heartland (Etchevehere’s Radical predecessor Ricardo Buryaile was more similar, entering the ministry from a lower house seat representing Formosa like Basterra). Trained as an agricultural engineer, the Chaco-born Basterra worked for 13 years for the eternal Formosa Peronist Governor Gildo Insfrán (his Production minister from 2003-2009) with an interlude as vice-president of INTA National Institute of Agricultural Technology (2009-2011) followed by two terms as national deputy. If Basterra ended up outmuscling former Agriculture secretary Gabriel Delgado for the ministry, it was because Vice-President Cristina Fernández de Kirchner trusted him as more likely to stand firm against the querulous farming sector.

As minister Basterra has accordingly had the thankless task of acting as a complaints department for policies not of his making – thankless but not hard since after just two meetings the farming lobbies seem to have given up the exercise as pointless. His first 10 days as minister saw soy export duties rise from 18 to 33 percent, with 15 percent levied on wheat and maize previously paying four pesos per dollar. Although uninterrupted by the pandemic as an essential activity, agriculture has been running pretty much on automatic pilot in the last two months without much visible direction from the ministry.      

The Agriculture Ministry is one of the few spanning three centuries. A creation of the second term of Julio Argentina Roca in 1898, after starting life as the National Agriculture Department under the wing of the Interior Ministry in 1871, it continued as a ministry for six decades until the advent of Arturo Frondizi in 1958 – his development creed (presenting Argentina’s choice as “candy or steel”) led him to demote agriculture to a department in the Economy Ministry with his industrial priorities maintained by his military successors. Briefly revived as an Agriculture and Livestock Ministry in 1972-1973 and 1981, its permanent return to ministerial status had to wait until 2009 when it was a paradoxical fallout from the Cristina Fernández de Kirchner administration’s epic clash with farmers over export duties, promoted by the wicked witch (in the sector’s eyes) herself with the addition of fisheries – Mauricio Macri rebranded the ministry Agribusiness (2015-2019). In the last decade it has had no less than six ministers and 41 in total with an average tenure of 21 months, a high turnover.

 

Michael Soltys

Michael Soltys

Michael Soltys, who first entered the Buenos Aires Herald in 1983, held various editorial posts at the newspaper from 1990 and was the lead writer of the publication’s editorials from 1987 until 2017.

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