BUENOS AIRES — Horacio Castagnola permits himself a smile as, with a deft
series of mouse clicks, he fills his computer monitor with satellite
photographs of the multicolored patchwork of farms in Argentina's fertile
corn belt.
By cross-checking land registers with the satellite images, taken every
16 days from 500 miles above the earth, Mr. Castagnola, Argentina's
general director of taxes, can keep track of who is planting which crops,
when they will be harvested, how much tax the farmer ought to be paying.
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Hence the smile.
Tax money is pouring into the coffers of the financially strapped country
— 5.5 billion pesos ($1.9 billion) in January, 64 percent more than a
year earlier — and Argentina's original economic engine, its farm sector,
is responsible for much of the amount.
While most of Argentina's economy is still groping for the smelling salts
after a four-year recession, the farm sector is enjoying a boom in export
sales, helped considerably by the plunge in the value of the Argentine
peso last year.
After a decade pegged at parity with the dollar, the peso was cut loose
last January, and is now worth about 34 American cents. Painful for most
Argentines, the devaluation has wiped out most farmers' debts by making
their products much cheaper overseas and effectively tripling the
domestic value of their export sales.
As a result, Argentina's trade surplus tripled last year to $15 billion,
with about half of the country's total hard-currency earnings coming from
agriculture, said Ernesto Ambrosetti, the chief economist at Sociedad
Rural, a farmers' association.
Though the Brazilian currency, the real, did not fall nearly as far —
just 35 percent against the dollar in the last year — Brazil is also
enjoying a farm export boom.
Farmers in the two countries have responded by stepping up production.
Soybeans, Argentina's main cash crop, now occupy 64 million acres in
Argentina alone. With record harvests in the offing, Argentina and Brazil
together are on track this year to harvest more soybeans than the United
States, the first time in memory that that has happened.
American businesses are jumping in. Bunge, a major American food
processor based in White Plains, is idling its soybean plant in Cairo,
Ill., and turning its attention to operations in Argentina and Brazil,
while Bunge's giant rival, Archer Daniels Midland is expanding in Brazil.
Even the crisis in Iraq is helping rather than hindering South American
farm exports. In the first two months of 2003, Brazil sold nearly $500
million of produce — mainly chicken, beef and sugar — to the Middle East,
60 percent more than in the comparable period in 2002, as countries in
the region stockpiled supplies.
The timing of the Argentine devaluation — in January, in the middle of
the Southern Hemisphere's growing season — worked to farmers' advantage.
"Farmers planted at one-to-one but harvested at nearly four-to-one,
and most managed to liquidate their debts," said Alejandro G.
Elsztain, chief executive of Cresud, an Argentine farmland management
company, referring to the peso-to-dollar exchange rate. "It was a
one-off," Mr. Elsztain said, "but it certainly helped put the
sector back on its feet, and now it's generating an amazing cash flow.
"Before the devaluation, Argentine farming was efficient," he
added, "now it's hyperefficient."
In the prosperity of the 1990's, Cresud saw the prices at which it bought
or sold good-quality farm land rise from $2,000 a hectare (about two and
a half acres) to about $5,000; prices collapsed in the political and
economic turmoil surrounding the devaluation, the company said, but they
are rising again and are now around $3,500 a hectare.
And it is finding buyers. Of the 29 large farms it owned in 1997, Cresud
has sold 11, using the profits to erase $20 million in debts and to buy a
24 percent stake in IRSA, a commercial real estate company with a market
value of $150 million; Cresud has an option to buy another 12 percent.
The farming boom has brought badly needed business to other sectors as
well.
Toyota was quick to spot the potential, and registered itself as a grain
dealer with the Buenos Aires Cereals Bourse so that it could take grain
as payment for its HiLux pickup trucks.
The rest of the Argentine auto market has all but collapsed, but HiLux
sales are up 25 percent in the last year, said Mario Gilbert, a Toyota
commercial director in Buenos Aires. Now, he said, the company is
planning to trade in grain futures as a substitute for extending credit,
and it has opened talks with llama farmers to barter wool for trucks.
All this activity promises a measure of salvation for the country's
battered treasury, which has promised the International Monetary Fund
that it will come up with 74 billion pesos in tax revenue and post a
surplus this year. "Agribusiness is, without doubt, the engine
driving the government's tax effort," Mr. Elsztain said. "The
I.M.F. should be very happy with us. Without agribusiness and oil,
Argentina would never meet the surplus they are demanding."
The government has imposed export duties of 20 percent on grain and 23
percent on soya and sunflower oil, provoking a one-week strike by grain
traders in early March and the threat of another one after elections in
April. But for now, the government looks a winner.
Traditionally, economists here say, the farming sector neglected to
declare about a third of its income to tax inspectors. But with Mr.
Castagnola's satellite surveillance covering 80 percent of the farmland,
more farms appear to be coming clean: declared values of harvested wheat
are up 25 percent over the past year, and revenues from soya, corn and
sunflower oil rose 18 percent, without a huge increase in plantings.
Mr. Castagnola has spent $100 million since late 2000 buying the aerial
photos from Landsat, the American satellite image company, but "for
every peso we spend, we get a return of 138 pesos," he said.
"From these satellite photos we can tell what sort of crop is being
grown in each field, and even how ripe it is."
Still, farmers like Mr. Ambrosetti say that the export levies the state
has imposed could throttle investment. "It's the opposite of the
United States and the European Union," he said. "We get no
subsidies; we subsidize the government."
But Javier Gonzalez Fraga, the former president of the central bank who
now operates a dairy farm, said that the real problem facing Argentine
agribusiness is not taxation but "the protectionism of the first
world."
In 1990, Mr. Gonzalez Fraga founded La Salamandra, which makes specialty
dairy products like milk caramel and buffalo mozzarella cheese for export
to Brazil, Chile, Spain and the United States. After his company won
praise at the New york Fancy Food Show, its shipments to the United
States have grown by 25 percent a year, he said, but the 68 percent
import duties levied by the United States mean that a pot of milk caramel
that costs $1 in Argentina sells for $8 in American specialty stores like
Dean & Deluca and Williams-Sonoma.
"Uncle Sam earns much more than me for every pot I sell," he
said. "And it's the same for lemons from Tucuman and beef from
Chaco."
Mr. Gonzalez Fraga does not think either the United States or the
European Union will expose their farmers to unbridled South American
competition soon. But if the European Union refuses to cut its
agricultural subsidies or the United States continues to keep
agribusiness off the agenda of free trade talks for the hemisphere,
"Argentina and Brazil will never be able to pay off their massive
debts," he said.
"That's elementary," Mr. Gonzalez Fraga said. "If they
don't buy, they're condemning us to eternal recession and the debt
spiral."
Link:
http://www.nytimes.com/2003/03/26/business/worldbusiness/26ARGE.html
Things are coming to a head on the Doha round of the WTO,and the crunch
is going to come on the exact question of agriculture.Corrupt crony
capitalism is slowly being pushed and prodded to the edge of a very high
cliff. pr.
