COMMODITIES-LATAM: Brazil Beefs Up Exports at Argentina’s Expense

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Feb 18 1999 (IPS) - Brazil’s beef exports increased last year, thanks partly to high prices in Argentina. And this year should also be a good one for local exporters, due to the more than 50 percent crash in the value of the real.

Brazil’s beef exports – which account for 1.1 percent of the country’s total sales – should stand at around 530 million dollars this year, 25 percent up from last year’s total, said Mario Marcito, executive director of the Brazilian Association of the Beef Exporting Industry.

The growth in Brazil’s exports of beef accompanied the rise in the price of meat in Argentina, because “price is the decisive factor” in the dispute over market share, said Marcito.

Due to the high cost of beef in neighbouring Argentina, the biggest growth in Brazilian sales abroad was seen in August, when exports were 42 percent up from the same month in 1997. In the following months the drop in prices in Argentina was accompanied by a fall in Brazil’s exports of beef.

In mid-1998 beef was scarce in Argentina, because since the previous year farmers had been concentrating their efforts, land and investment in grains, at the expense of ranching.

Not surprisingly, Chile’s interest in buying meat from Brazil has grown. In late 1998, that country sent a mission to study the health standards of cattle ranches in western Brazil, with a view to importing beef.

Chile’s interest in alternative sources arose as a result of the rise in prices in Argentina, its main supplier. And with the devaluation of the real, Brazil’s exports there should increase thanks to more competitive prices.

Chile is a small market, however, compared to the European Union, which absorbs two-thirds of Brazil’s beef exports, and the United States, which accounts for around 15 percent, Marcito pointed out.

Brazil and Argentina are partners in the Southern Cone Common Market – MERCOSUR – along with Uruguay and Paraguay. Chile and Bolivia enjoy associate status in the trade bloc, whose combined Gross Domestic Product (GDP) of around 1.1 trillion dollars accounts for 80 percent of South America’s total GDP.

With its southern region recognised as free of foot-and-mouth disease, and its central-western region well on its way to certification, Brazil is set to expand its exports of beef even further.

Besides the extensive tracts of land dedicated to ranching, the sector has a large amount of excess capacity, which means it would not take much investment to expand exports by 50 percent in a short period of time, said Marcito.

At the best of times, Brazil’s beef exports have climbed as high as 650 million dollars a year.

But for many years the country has sold more chicken than beef. From January to November last year, chicken exports – which account for two percent of the country’s total sales – stood at 678 million dollars, according to official figures – 16.3 percent down on the previous year’s level.

Beef and chicken exemplify the difficulties generated in Mercosur by the more than 50 percent crash in the value of the real since Jan. 13.

Chicken, the production of which has risen sharply in Brazil since the 1970s, was one of the products that gave rise to problems when the Mercosur customs union first went into effect in 1994, due to the explosive growth of poultry exports to Argentina.

Sectoral accords limited Brazil’s exports of chicken and prevented Argentina’s poultry farmers from being squashed, allowing the sector a grace period to improve its competitiveness. But the crash of the real has revived the imbalance, and threatens to trigger a new flood of Brazilian poultry into Argentina.

The dispute over beef, meanwhile, is being played out in third party markets. Brazil’s low prices could chip away at Argentina’s markets and, to a lesser extent, those of Uruguay.

Brazil imports beef from Argentina and Uruguay, but in small quantities, which are now shrinking. Restaurants and other big buyers have already begun to do without the high quality meat produced by the two countries, due to the high prices caused by the devaluation of the real.

Imbalance of trade within the bloc and competition in other markets will be the key focuses of a special Mercosur summit, scheduled to take place Feb. 21 in Rio de Janeiro.

Presidents Julio Sanguinetti of Uruguay, Raul Cubas of Paraguay and Carlos Menem of Argentina have already met Fernando Henrique Carodoso in Brazil to discuss the impact of the devaluation on the subregional integration process.

The Feb. 21 gathering will seek formulas designed to prevent further damage to the bloc. Unilateral measures in reaction to the Brazilian crisis must be avoided, said Cubas after his meeting with Cardoso last week.