This is a source for analysis, interviews, and commentary on security in Latin America. Herein you will find rumors, the results of off the record interviews, and information you'll not find in international or United States news media.

Tuesday, April 29, 2008

The International Element of Argentine Domestic Problems

The recent food riots in Haiti were just the tip of an iceberg that extends as far south as Argentina. Brazil and Argentina are the world’s top producers of soy, after the United States, and Argentina is the world’s top wheat producer.

Both countries are under increasing pressure to reduce exports to safe guard the economy and the county’s own food stuffs. But Argentina is in a very difficult position where the government is at the beginning of what may prove to be a long and nasty process of readjusting food supplies, prices, and the balance between international demand and local needs. It will be a process felt across the world.

The 30-day truce between farmers and the Argentine government will end on 2 May. So far, negotiations have not gone well, as farmers are reluctant to pay even higher export taxes – the third tax hike on soy, for example. As the personal grudge the Kirchners have against the Argentine mega-farm aristocracy wages on, it is likely further disruptions in export for meat, soy, and wheat will continue into the near future.

Argentina’s internal wheat demand is some five million tons a year. It produces 15 million tons of wheat annually, exporting ten.

The battle over food exports in Argentina and the spike in food prices world wide has exacerbated a far deeper problem the country has with inflation. The country’s Agricultural Minister recently resigned, in part, due to his decision not to be a member of an administration that actively works to hide the truth about inflation.

As the real value of the Argentine peso against the dollar continues to slip, food prices in Argentina will rise. It is one thing to work a month and not be able to buy a luxury item. It is entirely another to work full time and not be able to buy food.

Expect the situation in Argentina to rapidly decline into street-level protests, perhaps even riots if the prices continue to scale up. The effects Argentina’s internal problems will have on the international level will be felt in the poorest countries most dependent on Argentine wheat. West African countries are at the top of this list.

Well aware of the situation in Argentina, Brazilian President Lula announced on 25 April that his country will increase wheat production to reduce dependency on Argentina. Lula’s announcement is in part politics, but it also reveals his take on the Argentine crisis. It is one the Brazilian leader expects will not improve for months, perhaps even years, to come.

Meanwhile, Venezuela simmers. Chavez said on 24 April that one day Venezuela will be a food exporter. Today, however, it is one of the region’s few net food importers. Chavez is likely worried about supply from Argentina as well as international food prices in general as his price controls may slip as government subsidies are not able to keep up with the rising price of food.

If price controls on the retail side do slip, many Venezuelans would find themselves waiting in long lines for basic foodstuffs only to realize they can’t afford them now – not an ideal combination for stability.

Brazil will again take the lead to do what it can to fight the rising cost of corn, wheat, soy, and other foodstuffs, as demonstrated by its recent donation of money for food to Haiti. But Brazil cannot act alone. If Argentina is unable to meet the world’s demand for wheat and soy, the ripple effect will reach from the middle class outlets in the United States to the smallest market in West Africa and beyond.

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