What Soybean Politics Tell Us About Argentina and China

What Soybean Politics Tell Us About Argentina and China

The vast majority of Argentina’s soy products are exported, mostly to China. Rising Asian demand — for soy sauce, tofu, animal feed — has fueled the explosion of the soybean industry across Argentina, Brazil and Paraguay.

It should have been easy, traveling through Argentina, to find a bottle of soy sauce. My sons, born and raised in Asia, have a habit of seasoning their food with a few drops of it, and Argentina happens to be one of the world’s leading producers of soybeans. Flying over the country’s heartland — the fertile expanse known as the pampa húmeda — we could see endless fields of the legume. Over the past three decades, soybeans have gone from being a tiny part of Argentina’s agriculture-dependent economy to occupying nearly 50 percent of its cultivated land. Yet in every restaurant we visited, my sons’ requests for soy sauce were met with a quizzical look and a shrug: No hay. (“There is none.”)

The vast majority of Argentina’s soy products are exported, mostly to China. Rising Asian demand — for soy sauce, tofu, animal feed — has fueled the explosion of the soybean industry across Argentina, Brazil and Paraguay. The pattern is a familiar one for Argentina. A century ago, it became one of the world’s wealthiest countries on a per-capita basis by shipping the pampa’s abundant yields of grain and beef to Europe. The opulent 1929 Beaux-Arts building that houses the Board of Trade in Rosario, Argentina’s agricultural capital, evokes those days of grandeur. Today, however, it is the price of soybean futures that dominates the electronic tickers on the wall. Last year, Argentina exported $17 billion in soybean products, more than a quarter of its overall export earnings. Half the ships leaving the country are now full of soy goods — beans, meal, oil, etc. — and heading to Asia. “The old saying in Argentina is still true: ‘With a good harvest, we are saved,’ ” says Patricia Bergero, the board’s deputy director for economic research. “Our economy is very dependent on soybeans and China — perhaps too dependent.”

The beans, however, are just the beginning. Over the past decade, China has more than doubled its overall trade with Latin America and the Caribbean, to $244 billion in 2017, elevating China past the United States as the region’s top trading partner, a stunning development in America’s own backyard. Early on, China focused on gobbling up the resources it needed to feed its voracious economy: oil from Venezuela and Ecuador, copper and iron from Peru and Chile, soybeans from Brazil and Argentina. In the past few years, though, Chinese engagement has spread and deepened, especially with left-leaning governments that are in financial trouble and looking for an alternative to American influence. In Argentina, the president, Cristina Fernández de Kirchner, turned to China in 2014 after her government defaulted on $100 billion of international debt. In addition to offering $11 billion in currency swaps to increase Argentina’s depleted reserves, China began rebuilding a rail line across Argentina’s agricultural heart, constructing two hydroelectric dams and erecting a space station in the arid plateau of northern Patagonia.

When the conservative businessman Mauricio Macri succeeded Kirchner in December 2015, he seemed eager to do something few other leaders have dared: to push China away. Macri immediately suspended construction of the two dams in southern Patagonia, citing the lack of transparency and environmental impact surveys. Three months later, the Argentine Coast Guard sank a Chinese fishing boat that refused to leave the country’s territorial waters. The resistance didn’t last long. Not only did China quickly reduce its soybean imports by 30 percent in the first seven months of Macri’s government, but Chinese officials also reminded Macri that its investments in Argentina were linked. The dam contracts even had default clauses stipulating that the suspension of work would trigger the suspension of China’s railroad project, too. It was all or nothing. Did Macri want to end up with nothing?

Two other factors intensified the pressure: Argentina’s worsening monetary crisis and the election of Donald Trump. “When Macri took office, his government hoped to sign a trade agreement with the United States,” one Argentine government adviser told me. “Once Trump won, all hopes were banished. The calculus changed.” America’s trade protectionism diminished Argentina’s chances of having what people there call “carnal relations” with Washington. By early 2017, Macri traveled to China on a state visit. Resistance had turned into acquiescence. “His positions changed quickly,” says María José Haro Sly, an Argentine sociologist who has studied China-Latin American agricultural relations. “It’s funny, but Macri has now signed more deals with China than the two previous governments combined.”

The shift in attitudes was evident at the G-20 summit meeting in Buenos Aires late last year. Trump and Macri had a cordial one-on-one meeting; American support had been crucial for Argentina to obtain a $56 billion loan package last year from the International Monetary Fund. But when Trump’s press secretary, Sarah Huckabee Sanders, said the two leaders had discussed “predatory Chinese economic activity,” Macri felt compelled to object. “That comment ... was not representative of Argentina’s view,” one of his deputies told The South China Morning Post. “We value our relationship with China very much and have a very important commercial relationship with China.” Pleasing two superpowers is complicated. “At first, Macri tried to distance himself from China,” says Andrés López, the head of the economics department at the University of Buenos Aires. “But after seeing how hard that is, he’s trying to find equilibrium between China and the United States.”

When Macri met with China’s president, Xi Jinping, a couple of days later, they celebrated China’s role as Argentina’s most critical trading partner, investor and financier, the basis of their newly christened “comprehensive strategic alliance.” (It’s not as intimate as “carnal relations,” but a step up from the marriage of convenience that prevailed before.) In December, Xi and Macri signed more than 30 new agriculture and investment deals, including another $8.6 billion currency swap that makes China the biggest noninstitutional lender in Argentina. The swap functions as a no-interest loan that helps keep the government afloat and tamp down Argentina’s almost 50 percent inflation rate. The atmospherics of the meeting were even more telling. When the Argentine polo association presented Xi with a horse, the Chinese leader smiled delightedly as Macri fitted him with a red polo helmet emblazoned with the five yellow stars of China’s flag.

Macri isn’t looking his gift horse in the mouth, either. Despite his tough initial stance, Macri’s financially hobbled government is now embracing Chinese investments in oil, infrastructure and mining. Beijing is moving quickly to control the lithium fields in northern Argentina and Chile, which in 2017 accounted for almost half of global production of the element, which is used in batteries. In January, Macri traveled to southern Patagonia to reinaugurate the construction of the two Chinese-funded hydroelectric dams that he suspended three years ago. It was a humbling turnaround, but he was spared greater embarrassment when the larger dam — once named for Néstor Kirchner, the former president and husband of Macri’s rival, Cristina Fernández de Kirchner — was rechristened Condor Cliff.

In the city of Ushuaia, on the icy spine of Tierra del Fuego, a restaurant named Bamboo has a sign, in Chinese, that advertises the place as “the southernmost Chinese restaurant in the world.” Ever since Beijing approved Antarctica as a tourist destination about a decade ago, the number of Chinese visitors making the journey has jumped from zero to more than 8,000 a year (making up about 16 percent of all tourists to Antarctica in 2018). Almost all of them go through Ushuaia, where they crowd around Bamboo’s seafood buffet, which promises flavors that taste almost like home.

The rise in Chinese tourism to Antarctica is driven not just by exotic travel plans but also by strategic government priorities. Despite its geographical location far from the poles, China promotes itself as a polar power, maneuvering for influence over both the Arctic and Antarctic. Last year ground was broken on China’s fifth research station on Antarctica. Beijing emphasizes its desire to help govern the fragile continent, but analysts say a central objective is to gain access to Antarctica’s oil and mineral deposits — and to establish bases that will help China develop superior GPS technology, giving it an edge in the space-based arms race. (The Chinese space station in Argentina’s remote Neuquén province is also meant to advance China’s space-and-satellite technology.)

For all its geostrategic interests, China’s relationship with Latin America is still driven by basic commodities, and soybeans have become a symbol of superpower competition. As a result of the trade war and the retaliatory tariffs China placed on American soybean products, China did not import a single soybean from the United States in November. Brazil and Argentina have leapt into the gap. Despite a drought that reduced harvests by 40 percent last year, Argentina still exported seven million tons of soybeans to China. (To feed its crushing facilities, Argentina also became, weirdly, the largest importer of American soybeans in 2018, buying $1.3 billion of beans from desperate United States farmers.) This year, after abundant rainfall, Argentina expects to export 14 million tons of soybeans, double the level from two years ago — almost all of them will go to China.

When my family reached Buenos Aires, we realized that there were lots of Chinese-run grocery stores that sold soy sauce to the growing Chinese immigrant community. On the road, however, our predicament wasn’t resolved until we stayed at a small Korean-run hotel in the remote southern Patagonian town of El Calafate. When the Korean owner’s daughter heard about our sons’ hankering for soy sauce, she made sure to slip us a tiny glass bottle in a double plastic bag before our trip to the glaciers. We carried that bottle with us for the rest of our journey, pulling it out surreptitiously to put on our rice and eggs. It was only near the end that I realized that the soy sauce was, of course, made in China.

www.prensa.cancilleria.gob.ar es un sitio web oficial del Gobierno Argentino