Argentina’s farmers prepare to strike over beef export ban
Argentine farmers are braced for a showdown with the government as they prepare for a nine-day strike, starting on Thursday, to protest against a month-long suspension of beef exports aimed at controlling spiralling inflation.
Beef prices in the country have doubled over the past year, fuelling inflation that is running at 46 per cent annually. Officials are concerned that falling domestic consumption as a result of higher prices in one of the world’s top beef exporters could harm the government’s popularity ahead of crucial midterm elections later this year.
The export ban was first announced on Monday although it has yet to be made official. It is aimed at increasing domestic supply to relieve pressure on local prices, with inflation during the 17 months of Alberto Fernández’s presidency higher than that of any other president over the same period since Argentina’s last hyperinflation crisis in 1989.
Farmers largely attribute higher beef prices to rising costs, not just locally — especially for transport — but also owing to the booming international market for grains used to feed their cattle. But a ban on exports will force the government to forgo much-needed foreign currency from a sector that accounted for $3.4bn in exports last year, while net liquid central bank reserves languish at close to zero.
“They are shooting themselves in the foot,” said one leading beef exporter, who fears that big clients in China and Europe could look elsewhere for more reliable suppliers, such as competitors in Uruguay, Paraguay or Brazil — especially if the measure is extended, as feared. “Winning the markets back after this disastrous mistake will be very hard, and will mean selling at a lower price.”
Argentina’s exported beef is also different from what is sold locally, since it is from larger animals that are fattened with grains, thus more expensive to produce. That product will have to be sold at a heavy discount in the local market, producers say.
Some fear a repeat of the farming strikes of 2008, which were triggered by similar interventionist policies implemented by then-president Cristina Fernández de Kirchner, who now serves as Argentina’s powerful vice-president. Exports fell by as much as half and the national cattle stock was reduced by 20 per cent. Many meat packers also went bust and 12,000 industry workers lost their jobs. Although part of the industry has since reopened, it is still highly indebted.
“The problem is, you bring down prices in the short term — that’s going to happen — but at a very big cost in terms of production, jobs and exports. And there will be higher prices down the road,” said Marcos Buscaglia, a local economist, explaining that prices will rise again when, or if, Argentina’s cattle stock is replenished.
Kezia McKeague, a director at advisory McLarty Associates, said the measure will do further damage to Argentina’s international reputation and its export-oriented agricultural sector. Already, capital controls, import restrictions and price freezes are making business in some sectors increasingly unsustainable, 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 is more about short-term political objectives in a midterm election year than any economic logic,” she said. Despite the “famous unpredictability” of Argentine 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, she added.
Agricultural products make up about half of total exports, of which beef accounts for about 5 per cent, 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 dwindled, falling below an annual average per person of 50kg after peaking at almost 60kg in 2009.
Many farmers were already angry with Fernandez’s government, which has compressed their profit margins dramatically by raising export taxes and forcing them to convert their earnings in foreign currency at a steep discount.
Such discontent has raised concerns of a rerun of the 2008 clashes with farmers, which led to Fernandez’s resignation as cabinet chief at the time. “The government is repeating the same big mistake they made 13 years ago and the results will be as bad or worse,” said the beef exporter.