By Daniele Siqueira
Although this column is called “South American Crop Update”, as a Brazilian I usually write about… Brazil. This time, however, I ask my Argentine colleagues for permission to say how sorry I feel for their country and especially for their farmers. No, I am not being ironic. Although the measures recently announced by their new government are likely to benefit Brazilian agricultural exports (and the US exports as well!), that is definitely not the way farmers should be treated by any government – especially farmers who do so much for their country’s economy as a whole.
Leftist Alberto Fernández, the new President of Argentina, took office just a few days ago, but is already making history in Argentina’s long record of presidents who specializes in bad agricultural policies. Among other measures aimed to start fighting a serious economic crisis, his emergency bill sent to (and approved by) Congress last week raises export taxes on agricultural goods such as soybeans, soy meal, soy oil, corn and wheat.
For soybeans, meal and oil, the export tax jumped from 24.7 percent to 33 percent. For corn and wheat, it was raised from 6.7 percent to 15 percent. In short, that means that farmers in Argentina will make less money and, ultimately, will cut acreage in the coming years.
According to a study released last week by Buenos Aires Grains Exchange, farmers’ gross margins in the current 2019/20 crop season are likely to fall 50 percent for soybeans, 41 percent for corn and 17 percent for wheat, compared to 2018/19. The study also points out that farmers are likely to cut half a million hectares (1.2 million acres) from grains and oilseeds planted area in the 2020/21 crop season.
Former President Mauricio Macri, a liberal who took office in late 2015, failed to reignite Argentina’s economy after receiving it in very bad shape from his predecessor Cristina Kirchner (who is now back in the office as Alberto Fernández’s Vice President). But, as promised during his campaign, he removed a burden from farmers’ shoulders, cutting export taxes and granting them export licenses several months before the planting season.
As a result, Argentina’s corn and wheat acreage had a significant increase over the last four years. Corn exports doubled, bringing Argentina back to the fight with Brazil and Ukraine for the position of the world’s number-two exporter.
As if raising export duties on agricultural products and other measures such as price control and a tax on the purchase of foreign currency were not enough, Mr. Fernández’s emergency bill has a very ironic name. Translated into English, it means something like “social solidarity and productive reactivation law”, as if it would be able to make poor people’s lives better. I am sorry to inform you, Mr. President, but that will not work out.
When some of the poorest people of Argentina get a very low-quality job, receiving a salary artificially raised by the power of the President’s signature, and buying food at controlled prices, they might even think, for a brief moment, that they made the right thing voting for him.
But that will not last long, because inflation will soar; because farmers will fail to grow enough food for everybody if they don’t get a fair price for their production; and because there will not be any real productive reactivation. On the contrary, Argentina will get even poorer. It has happened here in Brazil before, we know how that goes and we don’t like when we see such an important neighbor taking the wrong way.