AGRICULTURE-ARGENTINA: Farmers in Deep Trouble

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Apr 2 1999 (IPS) - Argentina’s farmers are facing their worst crisis in years, up to their necks in debt and hit hard by the slump in commodity prices and the devaluation in neighbouring Brazil. Output is down, and relations with the government are tense.

Farm products account for 60 percent of exports in Argentina, the world’s top exporter of sunflowers and derivatives, second largest exporter of corn, third of soy and fifth of wheat, and one of the leading exporters of beef.

Thus, the plunge in prices – up to 50 percent in some cases – triggered by the financial crisis in southeast Asia in 1997 has hit this Southern Cone country particularly hard.

The crash of the local currency of Brazil, the main client for Argentina’s farm products – purchasing 23 percent of total output – and the largest member of the Southern Cone Common Market (Mercosur – Brazil, Argentina, Uruguay and Paraguay) trade bloc was the straw that broke the camel’s back.

Since mid-January, Brazil’s real has lost more than 40 percent of its value, sending shock waves throughout the region.

Agricultural consultant Guillermo de la Serna, a former director of the National Council of Grains, pointed out that while world output of farm products has increased due to subsidies enjoyed by farmers in the industrialised North and technological advances, demand has held steady.

In Argentina, meanwhile, output will fall from 14 to 11 billion dollars this year, according to Coninagro, which groups the country’s agricultural cooperatives. In the case of grains, this year’s yield will be 14 percent down from last year’s.

In 1989, when the doors of Argentina’s economy began to be thrown open, the grain harvest stood at 27.4 million tonnes. With the incorporation of new technology and fertilisers and the rise in prices triggered by increased consumption in Asia, output climbed to 67 million tonnes in 1998.

This year, which started out with tractor sales in January 48 percent down from the same month in 1998, the Secretariat of Agriculture predicts a total yield in grains of just over 58 million tonnes.

Meanwhile, farmers are over seven billion dollars in debt, after taking out loans to upgrade technology and purchase seeds during the years when international prices and local yields were on the rise.

Argentina’s farmers also face steep competition from the United States and the European Union, which heavily subsidise their agricultural sectors, in spite of promises to reduce such aid. Farmers here and in other countries that provide scant support for agriculture complain of unfair competition.

Against that backdrop, the Argentine government’s decision to raise taxes in the countryside – on fuel, income and interest on loans – brought howls of outrage from farmers, who for the first time in 10 years have drawn together in a common front.

Next week the Argentina Rural Society, which represents large agribusiness interests, the Agrarian Federation of small and medium farmers, and the confederation of farming cooperatives are to announce a number of protest measures scheduled to begin on Apr 12.

“The situation was already serious, but it is getting worse day by day,” the president of the Agrarian Federation, Rene Boneto, told IPS. “That is why there is no chance that we will change our minds about the protests.”

Agriculture Secretary Gumersindo Alonso, designated just six months ago, asked farmers for time to negotiate measures to assist the sector. But when he demanded that the government do something, Economy Minister Roque Fernandez asked him to resign.

Alonso “must decide whether he defends the interests of the government or of the farmers’ associations,” Fernandez said Wednesday.

The tension between farmers and the government and the imminent protests have thus already claimed a victim. Although Alonso remains in his post pending a meeting with President Carlos Menem, farmers consider him as good as gone.

Economist Osvaldo Barsky, an expert in agricultural affairs at the Latin American Faculty of Social Sciences, says the present crisis is especially serious, because the low prices have revealed internal difficulties that had previously gone unnoticed.

“High costs in Argentina – diesel fuel costs 40 cents of a dollar, compared to 17 cents in the United States – high taxes and the state’s scant protection of farmers, compared to the subsidies received by the sector in the world’s big competitors,” compound the external troubles, he explained.

Barsky acknowledged that the Argentine government was not in a position to shell out enormous subsidies to agriculture.

But he said it could support farmers by setting up a mixed entity to buy up output at prices calculated on the basis of the averages seen over the past few years, in order not to leave everything up to the swings of the market.