Tuesday, May 28, 2024

OPINION AND ANALYSIS | 22-05-2021 09:51

When beef is a beef

Back in 2006 the dollars from the commodity price boom perhaps gave Argentina the luxury of being able to sacrifice one of its export markets but that luxury does not exist today.

When President Alberto Fernández joined the bicentennial celebrations in Mexico three months ago, he could justify this absence from his pandemic-stricken country as rather more than some cosy ideological self-indulgence with his presumed soulmate Andrés Manuel López Obrador because he could boast a historic achievement – opening up the Mexican market to Argentine beef for almost the first time in eight decades. So much pride in that achievement then, only to be squandered this week by banning beef exports to the entire world (including, of course, Mexico).

That word “almost” in the first paragraph is central to the “And that reminds me …” theme of this column – almost the first time since 1940 because the Mexican beef market was briefly opened in the dawn of this century, only for the door to be slammed shut by the late Néstor Kirchner in March, 2006. For six months then, only to last a full decade – for one month now but until when? If it took even longer than a decade (15 years) to regain the Mexican market after the link was snapped, only to throw it away again in three months, how long will it take to recover the other markets after thus destroying their confidence if and when this current ban ends? Argentine beef may be unique but there are plenty of alternative sources of supply out there to fill the vacuum (including at least three of our neighbours now gifted with a golden opportunity).

If Néstor Kirchner slapped his 2006 ban because exports had risen to 40 percent of beef production, thus pushing up domestic prices, the pretext for this new prohibition is meat prices rising around 50 percent faster than an accelerating inflation. Yet a Kirchnerite government is not only stumbling twice against the same stone but also shooting itself in the foot for good measure. The counterproductive folly of this move is easy enough to explain. If ranchers are denied export dollars and restricted to earning in controlled pesos, they will then find more lucrative use for their land, thus reducing supply and pushing up demand and hence prices – even without such crass interference, it is hard enough to sustain the extensive farming of cattle-rearing against the explosive expansion of the voracious soybean in the last quarter-century. This is not just theory but fully borne out by the post-2006 experience – the export ban did indeed carry short-term benefits in giving Argentines perhaps a year or two of cheap barbecues but between 2008 and 2011 the national herd fell from 57.5 million to under 48 million head of cattle with prices moving in the opposite direction and some 140 meat-packing plants going out of business, while Argentina had dropped out of the world’s top 10 beef exporters by the end of Kirchnerism in 2015 after having been the third biggest a decade previously.

Back in 2006 the dollars from the commodity price boom perhaps gave Argentina the luxury of being able to sacrifice one of its export markets but that luxury does not exist today (even with a new commodity boom placing grain prices at near-record levels). And yet a government forced into the most extreme capital controls by its dollar shortage is gratuitously destroying one of its few remaining greenback sources. Nor do its depleted reserve dollars enjoy the same solidity of the pre-subprime 2006 United States currency with the Joe Biden administration embarking on the anti-Keynesian strategy of inflating a rapidly reflating economy – any corrective action against that by the Federal Reserve in the form of jacking up interest rates would be at the expense of commodities and emerging markets. Beyond the monetary aspects this ban is a resounding affirmation of a continued commitment to consumer-led over export-led growth.

Consumer-led growth primarily geared to this spring’s Greater Buenos Aires vote but even the electioneering benefits of this move are not as clear-cut as they might seem. Argentina’s three largest provinces are all Peronist-ruled and two of them (Santa Fe and Córdoba) strongly oppose this ban – thus Santa Fe Governor Omar Perotti (from the agri-business hub of Rafaela) commented: “The solution is to increase production, not close exports,” insisting that Argentina’s cattle herd suffices to cover both domestic and overseas markets. The exception is obviously Buenos Aires Province Governor Axel Kicillof, the ideologue of Kirchnerite economics in his previous ministerial incarnation (2013-2015), but his province will only account for 35 of the 127 Congress seats at stake in the next midterms.

Going back to 2006 (in keeping with this column’s aim of linking past and present), the clamp on exports did not take the form of an absolute ban, strictly speaking, but the creation of a ROE (Registro de Operaciones de Exportación) export register which over the next decade fluctuated between turning off the tap altogether and reducing overseas sales to a trickle. But the upshot was that beef exports fell from 700,000 tons in 2005 to under 200,000 by the end of Kirchnerism a decade later. The Mauricio Macri administration (2015-2019) rapidly regained lost ground by lifting export controls although the momentum of his policies actually produced the best results in the first year of the succeeding Frente de Todos administration – over 900,000 tons in 2020.

This week’s export ban has reminded considerably more commentators than this columnist of the 2006 experience with plenty of analysis and information in various media, but there is at least one aspect of that experience which I have yet to see anywhere. That was the unique opportunity back then, far more so than those being sacrificed now. Firstly, while mad cow disease was a major issue in the preceding decade (including the destruction of the entire British herd), a beef export ban was still in force in several countries in early 2006 when Argentina so gratuitously followed suit with isolated cases detected as recently as 2018. Argentina has been mercifully free of mad cow disease but it does have a long history of foot-and-mouth disease, which ended with the past century in 2000 when the country was internationally declared free of foot-and-mouth disease. Néstor Kirchner’s refusal to use these huge advantages to place the world at the feet of Argentine beef may be considered positively criminal.

Rural alienation with the beef export ban in 2006 had led to all-out war with the farming sector by 2008-2009 – let us see where this week’s repeat move takes us.   ​

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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