Soy and Politics in Argentina: An Interesting and Important Case in Various Ways

What happened

A week or so ago I posted on the protests in Buenos Aires. Farmers, enraged by a new export tax on grains that meant that they would be paying 40% on their exports blocked the roads to the ports and and Buenos Aires.

For several nights the urban middle class in a new alliance joined the farmers in protesting, resorting to the traditional cacerolazos (from cazuelas, pots), the banging of pots and pans. It sent prickles up the spine to hear the clanging of saucepans echoing up eight- to twenty-story high rises for hours and hours. My husband, returning by taxi from the north of the city, reported that the rhythmic beating accompanied him for the ten-mile trip.

The following week, President Cristina Kirchner responded with demonstrations in her support. She needed to because she’d only been in office three months (although she followed her husband) and her political survival was at stake. At the level of day to day life in Buenos Aires, it’s indicative that when we turned up at the National Art Museum it was closed because the employees had to attend the rally. Kirchner’s argument was that the farmers could export so much because the government keeps the peso low, that farmers enjoy cheap diesel, that the price of grains had risen and they could afford it, and that it was important that farmers grow food for the home market rather than soy for export.

After her demonstrations, and after she order a total halt to the export of beef, an industry that has been carefully managed for a long time, the farmers stopped the blockade, at least for the time being.

For another account of what it was like in Buenos Aires in March go to the blog by Saltshaker, aka chef and sommelier Dan Perlman. Check it out while you’re at it, as it’s the most interesting English-language site, perhaps the most interesting site period, on the contemporary food scene in Buenos Aires and has lots of non-food postings as well.

The Argentine press reported day to day events but had little context. In the US the Miami Herald seemed to do the best job but it was clear that this was not a story that was deemed likely to sell to Americans. In Europe, the British, probably because of their long-standing ties to Argentina, had the most coverage. As usual the Economist could be relied on for an informed report. So here’s my take.

Some background facts

In 2002, there was no export tax on grain in Argentina. In 2007 it was 22%. Cristina Kirchner’s proposal, produced overnight in the middle of the growing season, was to raise it to 40% (and the farmers pay income tax as well).

25% of Argentina’s budget comes from just this one tax. That is, much of the financial recovery from the meltdown of 2002, desperate times in Argentina, comes, as every taxi driver reminded us, from soy farmers.

Argentina’s production of soy has almost quadrupled in the last ten years.

The major users of soy are the US, China and the EU.

17% of Argentinian soy goes to China, 50% to the EU.

Argentina is the third largest producer of soy beans in the world.

Soy’s major use is as animal feed.

In short, Argentinean soy politics is crucial for Argentina, for the European Union, for China, and thus for the globe.

Framing the Issue

Several aspects of the protests struck me as interesting.

• Neither in the newspapers that I scanned, nor on television, nor among those Argentineans I talked to was much made of the environmental issues of the dramatic shift to soy growing in Argentina in the last decade, nor to the fact that this GM soy. I suspect in the United States this would have been given top billing.
• Nor was there criticism of agribusiness. Argentina’s major source of foreign income since the late nineteenth century has been large-scale export agriculture and no one has any doubt that agriculture is a business and should be run as such. La Nacion, the more stolid and upper middle class of the two major dailies, has a whole section devoted to El Campo (agriculture) on Saturdays, complete with statistics on the costs of irrigation, of electric fencing, as well as prices for livestock and crops, as well as ads for balers, drills, pesticides, fertilizers, and seeds. Not something you’d see in the NY Times or the Washington Post.
• One editorial from a farmer and administrative official in Inrieville in the province of Cordoba, angrily pointed out that his town received 4 million pesos (roughly three pesos to the US dollar) from the government and paid in export taxes in 2007, 100 million pesos, a figure that would double if the new tax went through. Clearly a major wealth transfer from country to city.
• It’s not just hard nosed agribusiness. In this same paper is a a column, Rincon Gaucho, that celebrates nostalgic memories of the gaucho and the country life. These rural virtues were much praised in the late nineteenth century by the right wing oligarchy that ran the country as an antidote to the immigrants, political unrest, and industrialization of the cities. These memories are still alive and well and played on by the government.
• Although there’s much talk of the oligarchy, in fact one of the country’s largest agribusinesses had its roots in the enterprise of an impoverished Jewish immigrant from Moldavia in the early twentieth century. Now the Los Grobo group is the leader in soy agriculture.
• Argentina is a member of the Cairns Group, a group of countries that between them produce 25% of the world’s export agriculture. They include Australia, Brazil, Canada, Thailand, the Philippines, South Africa, Indonesia, and New Zealand. They are committed to working to eliminate both tariffs and subsidies in agriculture. That’s why Argentina effectively does not have agricultural subsidies.

Unanswered Questions
The reporting leaves me with all kinds of questions. Here are some.

• How much soy meal do China and the EU have in hand? What would happen if there were a protracted break in supply?
• Why is the EU buying Argentina soy meal, given its hostility to GM crops?
• What are the global players saying/doing about the new food policies in Argentina? On the industry side, you have the big grain companies such as ADM, Bunge, Cargill, and Dreyfuss, on the finance side you have banks such as HSBC. On the political side you have the other members of the Cairns group who must see the imposition of an export tax as counter their entire agreement?

Bottom Line

I think the Kirchner strategy is a very dangerous one. Argentina can produce far more food than it needs to feed its people. It desperately needs foreign currency. It has one of the most efficient agricultural industries in the world. Farmers are doing well now, but they have had a number of lean years. Imposing this tax will produce revenue in the short run but do nothing to encourage farmers to continue to invest in export agriculture. Sudden veers in government policy make it possible for businessmen (farmers) to plan.

At another level, the Argentinean crisis should be interesting to anyone concerned about good food. First, because it threatens the global food system. Second, because it’s a useful lesson in how thinking about global food issues, it’s important not to take the US as typical. Same issues there, but different context.

• ← Minute Rice and Nineteenth Century Urdu Poetry
• More on Grain and Argentina →