The Economic Impacts of Argentina’s Beef Export Crisis

0

RAYMOND, Maine — In 2018, Argentina’s economic crisis began due to a devalued peso, accumulated debt and a surging inflation rate. In May 2021, rising domestic prices of beef caused the Argentine government to implement a 30-day ban on beef exports. Unfortunately, this led to an exacerbation of poverty rates within the country, starting what has been coined as Argentina’s beef export crisis. With Argentina’s continuously falling Gross Domestic Product (GDP) and rising poverty rates, the questions remain: did the ban do more harm than good and what can be done?

How Did the Beef Export Crisis Begin?

Argentina has “one of the largest economies in Latin America.” However, 2018 was the beginning of a recession, caused primarily by the peso’s value and hyperinflation. The peso’s value began declining in 2018. By late June 2021, one peso was worth approximately $95. In 2018, Argentina’s ability to maintain a valued currency came into question as the country has a history of defaulting on loans. As a result, investors withdrew, inflation hit and the peso devalued internationally.

Ironically, the expectation of inflation is one of inflation’s most common causes. As the peso lost value, the expectation for inflation grew. Inflation reached 48% and immediately made Argentina’s national debt difficult to manage. As most of its debt is in foreign banks with different currencies, the Argentine debt is daunting to handle with a devalued peso.

Argentina’s leadership has introduced policies and bills to attempt to stop Argentina’s expanding poverty rate, which rose to 47% in late June. The latest policies target Argentina’s beef exports. Despite the government’s efforts, the beef export bans will likely contribute to the country’s still-growing poverty rate. The ban hastened Argentina’s beef export crisis, which officially began mid-May of 2021.

How the Crisis Affecting Argentina’s Beef Exports

Argentina’s government banned beef exports in May 2021 for 30 days. The government implemented the ban hoping to lower Argentina’s domestic beef prices. The plan was to stop international sales of Argentinian beef in currencies that undervalue the peso. In theory, stopping international sales of beef would increase supplies and lower domestic prices. However, Argentina’s beef export ban was unwelcomed by many, especially those in the beef industry.

Argentina’s beef export crisis influences prices both domestically and internationally. After the implementation of the ban, beef prices in Argentina reached up to 5,000 pesos ($53) for one pound of the cheapest cut. At the time of the ban’s implementation, prices had increased more than 60% in the previous year.

Argentina’s agricultural and farming industry contributes a significant part to the country’s export earnings. This is largely distributed between its three primary exported crops: corn, soybeans and beef. Unfortunately, Argentina experienced the worst farming season in decades in 2017-2018. Droughts limited the production of corn and soybeans, making beef Argentina’s highest-grossing agricultural export.

The export ban expired in mid-June of 2021, and the government began allowing some beef exports to resume. Beef is now being exported at half of its usual capacity. The lowered export rates are planned to last until 2022.

How is the Crisis Reflected in Argentina’s Poverty Rates and GDP?

In 2017, the Argentine GDP surpassed $640 billion. However, in 2019, the GDP had dropped to just under $445 billion. In 2020, Argentina’s GDP dipped to below $390 billion. The GDP is optimistically projected to improve by the end of 2021. In recent times, Argentina’s agriculture has made up almost 7% of the country’s overall GDP. Pausing beef exports limits the GDP’s chances of improving because beef is now the third minimized agriculture sector after soybeans and corn.

The poverty rate in Argentina first grew as a result of the COVID-19 pandemic. Then it continued to rise because of Argentina’s agricultural challenges. In 2019, the poverty rates hit 35% and rose to around 41% during the first half of 2020. When the beef export bans began, farmers lost work. They lost trade and income, and daily workers lost wages. Although farmers could continue their work and distribute their goods domestically, before the ban most of their income resulted from the exportation of their goods.

Although agriculture accounts for less than 1% of the Argentine workforce, a significant portion of Argentina’s poorest work in the sector. In 2017, an estimated one-third of Argentina’s rural citizens live in poverty where the cattle farms operate. With Argentina’s beef export crisis, this figure is likely to grow by the end of 2021.

Is There a Better Solution?

There is no perfect solution to Argentina’s beef export crisis. Beef export workers protested the ban by stopping production, but there was little governmental response. Omar Perotti, Argentina’s governor of Santa Fe, shared his solution on Twitter: “The solution is to increase production and not close exports. We have the conditions to supply the internal and external market, maintaining the possibility of exporting our products to the world.”

Before the ban, Argentina has exported up to 70% of its beef supplies to China. Continuing exports would maintain Argentina’s relationship with China and resolidify confidence in Argentina’s government and economy. Increasing production also allows farmers and exporters to continue working, hire more laborers and attract foreign investors. The returning and new investors could strengthen the peso and shrink inflation rates. Expanding production provides a more equitable share of beef domestically and internationally. The poverty rates would go down with more working opportunities, and the struggling agriculture sector would stabilize.

Argentina’s beef export crisis is a result of a faulty economy and a devastating poverty rate. Continuing the ban will only harm the workers and Argentina’s citizens. However, increasing production would improve conditions for all involved.

Clara Mulvihill
Photo: Flickr

Share.

Comments are closed.