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April 1998

Argentina: Crisis Hasn""t Eased

April 28, 2000

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By Marcela Valente

BUENOS AIRES, Apr 28 (IPS) - One of the factors of greatest concern to farmers in Argentina, who remain in the grip of a severe crisis, are the subsidies shelled out to agriculture in the United States, the European Union and Japan.

Another pressing concern mentioned by farmers in a survey carried out by the Victoria Manny polling company as part of an "Agricultural Outlook 2000" seminar organised this month by the AgriPac consultancy was the urgent need for tax relief to compensate for the disadvantages faced on the global market.

Local farmers associations submitted a formal request this month for tax relief to President Fernando de la Rúa - in office since December - who pledged to come up with a comprehensive plan to address the crisis affecting farmers in this Southern Cone country, whose economy is heavily dependent on agriculture.

The countryside has been caught up in a major recession since 1997, when the global financial crisis first broke out in southeast Asia, the market for much of Argentina's farm output.

The slump in commodity prices came after a boom period in the values of Argentina's chief export grains and seeds, which farmers recall with nostalgia as the highest prices seen in decades.

From 1991 to 1999, the price of wheat averaged 129 dollars a ton, compared to an average of 98 dollars a ton so far this year.

The price of corn plunged from a 98 dollar average throughout the 1990s to 83 dollars a ton so far this year, sunflowers from 189 to 140 dollars and soybeans - the standard-bearer of Argentina's countryside - from 211 to 177 dollars a ton.

The impact of the crash in international prices was reflected by the high level of indebtedness of farmers, who owe nearly the equivalent of 65 percent of annual farm output, and by the continuing disappearance of small family farms.

It was also reflected by the roughly 50 and 40 percent plunge in sales of tractors and combine-harvesters, respectively, from 1998 to 1999.

Due to the crisis, the land under cotton and rice cultivation shrank by 54 and 27 percent, respectively, from 1998 to 1999, while sales of seeds and agrochemicals dropped 16 and 20 percent.

The slight rallying of farming activity this year has not been a cause for great optimism, say experts and authorities in a country where agricultural production accounts for more than 60 percent of total exports.

Soybeans, soybean oil and soyflour - of which Argentina is the world's leading exporter - are the country's top foreign exchange- earners, followed by petroleum sales, wheat, corn, sunflowers, seafood, cars and beef.

The high productivity of Argentina's farms is based on the country's top-notch soil and weather conditions. Because the sector does not depend on any kind of subsidy, local farmers complain that it is unfair for countries in the industrialised North to subsidise their less efficient agricultural production, thus pushing down international prices.

Nor is there much hope for progress towards eliminating farm subsidies in the negotiations on agriculture set to begin this year in the World Trade Organisation (WTO).

In March the WTO Committee on Agriculture scheduled meetings this year, after the fiasco of the late 1999 WTO ministerial conference in the US city of Seattle.

The meetings slated for June, September, November and December are to come up with proposals on four specific areas - export subsidies, internal aid, market access and rules and discipline - to be submitted to the Committee on Agriculture in March 2001.

The Cairns Group, comprised of Argentina and 14 other agricultural exporter countries that provide virtually no subsidies to farmers, and which are in favour of eliminating all subsidies, is drafting a document to be submitted to the WTO Committee on Agriculture.

But farmers in Argentina, especially small farmers, cannot afford to wait for the outcome of that process, which is uncertain at any rate.

Up to their necks in debt and bearing an increasingly heavy tax burden, thousands of small farmers are facing the choice of barely scraping by in poverty or auctioning off their lands, which generally end up in the hands of large landowners.

The conditions are critical for all, but experts say large- scale production offers a better chance of cutting costs and securing lower interest rates on loans.

The burden of internal costs is a key problem for farmers, and was mentioned as the second-most pressing cause for concern by the producers surveyed during the recent "Agricultural Outlook 2000" seminar in Buenos Aires.

One of the aims of farmers is to obtain lower fuel prices. A study carried out by the Argentine Rural Society's Institute of Economic Research estimates that fuel represents 50 percent of the costs of rice production.

"Agriculture is the sector hit hardest by the high price of diesel fuel," states the study. "Given the quantity of fuel used by rice producers, fuel prices push costs up twofold."

Farmers are hoping the De la Rúa administration will soon announce measures aimed at lowering fuel prices, after negotiating with oil companies. They also want to see a reduction in the taxes paid on fuel.

Farmers are demanding that the president live up to his campaign pledge to renegotiate the rates charged by the privatised utility companies, and that it take anti-trust measures against mergers of agribusiness companies, another development conspiring against small farmers.

Rural producers are also demanding the revocation of new taxes created in recent years, like the tax on interest, and have even suggested subsidies for the poorest farmers, similar to those shelled out by the European Union, the United States and Japan.

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