Argentina: historic drought worsens economic crisis – 05/16/2023 – World

“Una porería”, producer Antonio Coarasa, 48, releases in good Spanish, as he effortlessly pulls a handful of sticks out of the ground and shows how they crumble in his hand. “They are useless”, laments the businessman, surrounded by what would be one of his soy productions.

The branches should reach almost to the knee, but not even to the shin. The long rows of the plant should also cover the field in yellow, but only black branches remain. Tons of grain should already be stored in barrels, but in many parts there will not even be a harvest.

This is the result of three years with record lack of rain in Argentina, combined with strong heat waves and unseasonal frosts. The historic drought aggravates the economic crisis faced by the government of Peronist Alberto Fernández, an issue that should define the country’s presidential elections in October.

The president used the image of the scorched plantations as one of the justifications for giving up running for re-election last month: “The drought forces us to redesign all our objectives, to dedicate ourselves exclusively to this new challenge”, he said in the video in who announced the decision.

The rains began to wane in 2020, when the La Niña phenomenon caused a massive cooling of temperatures in the Pacific Ocean that only ended in March of this year. As a result, there was a long period of drought across the lower part of South America, including southern Brazil.

The World Meteorological Organization (WMO) warned that although this is a natural phenomenon, it occurred in a “context of climate change caused by human activity that increases global temperatures, affects seasonal patterns of rainfall and causes more extreme temperatures”.

In Argentina, the affected areas are equivalent to almost the entire Northeast of Brazil, even after a truce with the end of La Niña. The lack of water is especially severe in the “core zone”, the fertile border between the provinces of Buenos Aires, Santa Fe and Córdoba where Coarasa cultivates thousands of hectares of land.

“We drilled wells four meters deep with machines in a lake that had been there for 60 years and we found absolutely nothing. There are people who say they have never seen anything like it,” he says next to large cylindrical bales of dried peas in the city of Zárate , 90 km from the capital.

The leguminous plant, whose harvest was bad, will be sold as feed to cattle producers, who also ran out of pasture and now have to pay for food. More than 21 million head of cattle are at risk in the country, according to a March report by the National Directorate of Emergency and Agricultural Risk.

“A lot of people sold their cows to slaughterhouses because they were starving. They delivered weak animals for slaughter, for a bad price,” says Juan Pedro Malacalza, 31, another producer in the area. With nothing to eat, females cannot get pregnant or give milk.

“Drought means fewer harvests and fewer trucks transporting grain to the port, for example. There is a reduction in the entire production chain in small and medium-sized cities in the interior”, says Cecilia Conde, head of agricultural estimates at the Buenos Aires Grain Exchange.

Agricultural exports are the main source of dollars for Argentina, which suffers from a lack of currency reserves in public coffers. Only soybeans and corn represent 40% of the dollars that enter the country.

In this last cycle, production should still fall by almost half, contributing to a loss of US$ 14 billion (R$ 69 billion), according to the Rosario Stock Exchange. The agency projects that, after decades, Argentina will lose its position as the world’s largest exporter of soybean meal to Brazil.

“There was a change in the flow of global transactions. With the downturn in Argentina, buyers moved to Brazil [que teve safras recordes] and for the US”, says Lucilio Alves, a researcher at the Center for Advanced Studies in Applied Economics (Cepea) at the USP School of Agriculture (Esalq).

Domestically, the drop in production sends food prices soaring, and the decrease in revenues worsens the fiscal deficit, heating up the engines of inflation, which has already reached historic levels. It also makes it difficult to repay the biggest loan ever made by the IMF (International Monetary Fund), of US$ 44 billion.

The country has been asking help from Luiz Inácio Lula da Silva (PT) to renegotiate the debt and speed up disbursements by the organization, which indicates that it will be more flexible in conversations due to the impacts of the drought.

Faced with uncertainties, producers like Antonio keep tons of beans in “chorizos” as collateral: giant plastic sausage-shaped bags. “My father would sell and put the money in the bank, but after the corralito [congelamento das contas pelo governo, em 2001] no one trusts anymore,” he says.

To encourage the sale of these stocks and the inflow of dollars, the government introduced a new “agro dollar” in early April – Argentina has more than 15 quotations, depending on the sector. Thus, for 45 days, each dollar obtained from the sale of soybeans would yield 300 pesos, not the official 210 at the time. “It was the third time the government has done this. In September and December it was very successful, but not this year, because the producers say: why sell if it’s going to devalue?”, says Sebastián Gavaldá, director of the consultancy Globaltecnos.

The limited effects of the measures implemented so far, added to a 33% tax levied on producers for soybean exports and a 12% tax on corn and wheat, the so-called “retenciones”, generate strong rejection in the countryside of a government candidacy in October .

“There are more than 250,000 agricultural producers in Argentina. I think that 80% or 90% will vote for the opposition”, bets producer Malacalza, who intends to support the ultraliberal Javier Milei. “I’ll vote for someone who tells me what I want to hear. I’d rather hear that I’m nice and thin, not ugly and fat”, he jokes.