Argentina’s beef sector fears damage from export closure, based on past history

RIO DE JANEIRO, BRAZIL – Argentina’s beef production sector, which employs 400,000 people and generates annual exports of US$3 billion, fears that the Government’s decision to suspend shipments abroad to curb prices in the domestic market will generate major damage to the activity, as it happened fifteen years ago.

The measure, which has been in force since last Thursday and for a period of one month, has been widely rejected by exporters, slaughterhouses, unions of the sector, governments of some producing provinces, and the cattle farmers themselves who, as a protest, decided not to send live cattle to the Liniers market, in Buenos Aires, the main market in Argentina, until next Friday.

The South American country is one of the world’s largest consumers of beef per capita (45 kilos per year). The Government claims that the measure seeks to curb the price of this fundamental food on the table of the Argentines, which in April registered a year-on-year increase of 66.1 %, well above the general price variation of 46.3 %.

But the sector assures that closing exports will not only fail to contain inflation but also bring multiple economic damages to the country, dragging behind it three years of severe recession.

A “DISASTER” THAT HAS ALREADY HAPPENED

The “mistakes of the past” that the sector asks people not to forget, refers to the impact of the intervention process that the beef chain suffered between 2005 and 2010, including an export closure in 2006.

“It was a disaster. We lost 10 million head of cattle. We went from having 10% of the world market to less than 2%. And after three years, meat ended up being worth three times more in real terms,” said livestock consultant Víctor Tonelli.

For the expert, “the worst thing” is that the government is not unaware of this impact, since between 2003 and 2008, the Chief of Staff was the current President, Alberto Fernández.

According to a report by the Institute of Studies on the Argentine and Latin American Reality of the Fundación Mediterránea, that intervention process implied annual losses for Argentina of US$1.5 billion in exports, a drop in production, and a decapitalization due to a reduction of the livestock “stock” of some US$4.9 billion.

According to data from the sector, 19,000 jobs were lost.

For the livestock consultant Fernando Canosa, the new closing of exports is “nonsense”, since there is no reason to believe that the measure will have different effects from what happened fifteen years ago.

“With the pressure from producers, slaughterhouses, unions, and governors, and with the marketing strike that is being carried out, we hope that there will be a reversal of the measure. But if this is maintained over time, the same effects could occur as in the past,” said the expert.

IMPACT ON MARKETS

Argentina is the world’s fifth-largest producer and fourth-largest exporter of beef. It sends abroad 30% of its production, with exports totaling US$2.72 billion dollars in 2020, driven by demand from China, which accounts for three out of every four tons of Argentine placements.

According to Tonelli, after announcing the closure of exports, the price of meat jumped 10% in the international market, “and the worst thing is that 250 million dollars per month are no longer coming in from exports” to Argentina.

Although the closure of exports excludes 20% of the shipments that correspond to operations linked to export quotas (such as the Hilton quota to the European Union) and agreements under tariff preferences, many companies will be forced to breach their shipment contracts.

“The companies that do not comply with the agreements will clearly face penalties. And the worst thing is that Argentina loses seriousness and credibility as a supplier”, warned Canosa.