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Argentine farmers are poised to confront the government as they prepare for a nine-day strike, starting Thursday, to protest a month-long suspension of beef exports aimed at controlling spiraling inflation.
Beef prices in the country have doubled in the last year, fueling inflation which stands at 46% annually. Officials are concerned that falling domestic consumption as a result of higher prices at one of the world’s leading beef exporters could hurt the government’s popularity ahead of this year’s crucial midterm elections later this year. .
The export ban was first announced on Monday, although it has not yet been made official. Its aim is to increase the national supply to relieve pressure on local prices, with inflation during the 17 months of Alberto Fernández’s Presidency higher than any other president during the same period since Argentina’s last hyperinflation crisis in 1989.
Farmers largely attribute the highest levels calf prices to rising costs, not only locally, especially for transportation, but also due to the rise of the international market of cereals used to feed livestock. But the export ban will force the government to give up the necessary foreign currency from a sector that accounted for $ 3.4 billion in exports last year, while the net liquid reserves of central banks are fading to almost zero.
“They’re shooting themselves in the foot,” said one of the leading beef exporters, who fears large customers in China and Europe could look for more reliable suppliers elsewhere, such as competitors in Uruguay, Paraguay or Brazil, especially if the measure is extended, as feared. “Recovering the markets after this disastrous mistake will be very hard and will mean selling at a lower price.”
Beef exported to Argentina is also different from that sold locally, as it comes from larger animals that are fattened with grains, so they are more expensive to produce. This product will have to be sold at a sharp discount in the local market, the producers say.
Some fear that the agricultural strikes of 2008 will be repeated, caused by similar interventionist policies implemented by the then president Cristina Fernández de Kirchner, who is now The powerful Argentine vice president. Exports fell by half and domestic livestock fell by 20%. Many meat packers also exploded and 12,000 industry workers lost their jobs. Although part of the industry has reopened since then, it remains heavily indebted.
The problem is that you reduce prices in the short term (this will happen), but at a very high cost in terms of production, jobs and exports. And there will be higher prices down the road, ”said Marcos Buscaglia, a local economist, who explained that prices will go up again when Argentine cattle are replaced or if they are done.
Kezia McKeague, director of consulting firm McLarty Associates, said the measure will further affect Argentina’s international reputation and its export-oriented agricultural sector. Already capital controls, import restrictions and price freezes are making businesses in some sectors increasingly unsustainable and forcing some companies to leave the country.
“While the impact of high inflation rates is devastating for the average citizen, the decision to sacrifice Argentina’s quintessential export has more to do with short-term political goals in an election year in the medium term than with any economic logic, ”he said. Despite the “famous unpredictability” of Argentina’s economic policy, governments on both sides of the political spectrum have promoted the need to increase the country’s export capacity, which remains low relative to gross domestic product, he added. .
Agricultural products account for about half of total exports, of which beef accounts for about 5%, after recovering significantly since the end of Fernández de Kirchner’s presidency in 2015. But beef consumption in Argentina, where juicy steaks enjoy a special place in local culture, has declined, falling below the annual average per person of 50 kg after exceeding almost 60 kg in 2009.
Many farmers were already angry with the Fernandez government, which has compressed their profit margins dramatically by raising export taxes and forcing them to convert their income into foreign currency at a sharp discount.
This discontent has raised concerns about the reworking of the 2008 clashes with farmers, which led to Fernandez’s resignation as chief of staff at the time. “The government is repeating the same big mistake it made 13 years ago and the results will be just as bad or worse,” the beef exporter said.
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