The Stagnation of Argentina’s Rural Sector: Obsolete Economic Policies Limiting Potential

The countryside is a fundamental economic sector for Argentina, but, due to obsolete economic policies, it is unable to express its enormous and recognized potential.

The rural exhibition in Buenos Aires has captured the country’s attention on the countryside. It is a fundamental economic sector for Argentina, but, due to obsolete economic policies, it is unable to express its enormous and recognized potential. One of its most affected activities is the production of beef.

Argentina is one of the largest beef producers in the world. However, it still produces the same amount of beef as in the 1980s when it was, along with Brazil, the world’s second largest producer of beef, only surpassed by the US. Since then, Argentine production has stagnated, while The US grew by +23% in the same period and Brazil by +225%. According to the FAO, Argentina today produces 3 million tons per year: three times less than Brazil (almost 10 million tons per year).

Argentina is the only Mercosur country that has not increased its beef production in the last 40 years. Since 1981 Paraguayan and Uruguayan productions have increased to almost 0.6 million tons per year, an increase of 50% for Uruguay and 500% for Paraguay.

In Argentina, not only production has stagnated, but the number of cattle heads has decreased. In 2007 Argentina had almost 59 million head of cattle, but in 2010 it dropped by 10 million (17%). To date, the stock of cattle heads has not yet been recovered. 2022 closed with 54 million copies, equivalent to 4.5 million less than in 2007 (8 percent).

In the same period in the other Mercosur countries, the Uruguayan bovine stock has remained constant at around 12 million heads (magnitude that implies 3.5 heads of cattle per inhabitant), while the Paraguayan stock has gone from 10 to 14 million heads. heads. The bovine stock in Brazil has gone from 200 to 225 million head, up 12.5 percent.

Argentina is one of the largest producers of bovine meat in the world. Yet it still produces the same amount of beef as it did in the 1980s.

The stagnation of the Argentine sector during the last two decades in particular is explained by the applied economic and commercial policies. The Argentine State came to prohibit the export of bovine meat on several occasions and for a long time. It imposed arbitrary quotas in quantity or cuts that prevented compliance with international commitments or directly losing markets. In addition, the price was regulated within the domestic market.

Argentina’s anti-export policy makes foreign sales of the country’s beef more comparable with the amounts handled by Uruguay and Paraguay, since Brazil exports 4 times more meat.

In the years that the government imposed withholdings, quotas and/or prohibitions on exports in addition to exchange restrictions (2007-15), Argentina has exported less beef than Uruguay or Paraguay. In the years in which the sector was able to operate without these restrictions, Argentina exported more than Paraguay and Uruguay combined.

Argentina’s anti-export policy makes foreign sales of the country’s beef more comparable to the amounts handled by Uruguay and Paraguay, since Brazil exports 4 times more

The return of obstacles, quotas and withholdings from 2019 has slowed the growth of exports. This is another missed opportunity for Argentina as the price of beef continues to rise.

Over the last three decades, the price of beef has more than doubled in real terms, from USD 2.14 to USD 5.78 per kilo.

The return of obstacles, quotas and withholdings from 2019 has slowed the growth of exports. This is another missed opportunity for Argentina as the price of beef continues to rise.

Over the past three decades the price of beef has more than doubled in real terms from $2.14 to $5.78 per kilo.

Argentina is the only Mercosur country that has not increased its beef production in the last 40 years

In addition, in the years in which the government imposed obstacles to the exports of the sector, Argentina could not meet the Hilton quota, the quota that the EU assigns for the importation of high-quality chilled and boneless cuts of beef.

Argentina, with 29,500 tons per year, is the largest beneficiary of the Hilton quota, but the country had its worst compliance between 2009 and 2017 and its best compliance in years without such restrictions.

In addition to the stagnation of the sector, during the last two decades Argentina has not been able to reach any commercial agreement that allows access to new markets. Today, beyond continuing to export to the European Union, the main destination for Argentine and Mercosur beef is China. Almost two thirds of exports from Argentina, Brazil and Uruguay go to the Asian country.

The rise of the Chinese market is a recent phenomenon since 10 years ago less than 10% of the exports from the three countries went to China. The Uruguayan government’s willingness to sign free trade agreements with China, in addition to closing the one with the EU, is not surprising then.

The neighboring country’s interest is to deepen trade, encourage beef production and increase the country’s exports. On the contrary, Argentina seeks to disconnect from the international context, even if it favors it.

During the last two decades, Argentina has not been able to reach any commercial agreement that allows access to new markets.

Given the increase in the international price of food and the greater international demand, the Argentine State seeks that the increase in international prices does not reach the producer, imposing commercial, tax, exchange and legal obstacles that prevent the export of meat or other foods. It does not matter that this implies losing the possibility of increasing exports and even condemning the decapitalization of the affected sector.

In general, Argentina’s insistence on continuing with obsolete economic policies that no other country applies ends up affecting the development of the economy in general. The comparison with the other Mercosur countries warns that the country is losing an enormous opportunity with foreign trade. Opportunity that is not missed by any of the other Mercosur partners.

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2023-07-30 03:50:16
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