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Thursday, March 13, 2014

Pricey Beef A Tender Topic In Argentina



March 13, 2014 3:04 pm

Pricey beef a tender topic in Argentina

Cattle©Bloomberg
One hundred years ago, beef madeArgentina rich. Today it is making Argentines poor. At a classic Buenos Aires steak house with surly waiters and walls lined with nostalgic black-and-white photographs, Luis Hernández articulates the sorrow of many when he says: “An Argentine without beef is like a football team without its best striker.”
Like his fellow countrymen, Mr Hernández, a furniture salesman, loves meat – on average, Argentines gorge themselves with 64 kilos of beef a year, more than twice the amount eaten by consumers in other meat-hungry countries such as the US or Australia. The produce of the Pampas region’s fertile plains is ingrained in Argentine society. It bred the country’s “gaucho” culture, brought in mass immigration from Europe and set the nation up as one of the world’s richest by the early 20th century.

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Yet now, the country’s economic problems, especially inflation of about 30 per cent last year, and the government’s long record of haphazard policy making, are jeopardising what Mr Hernández and many Argentines believe is their birthright.
The fears of carnivorous Argentines are shared by the government of President Cristina Férnandez de Kirchner, which demanded last month that beef be sold at “accessible” prices amid concern that a 30 per cent jump in beef prices since November is leading to a drop in consumption. Economists predict that Argentina will slip into recession this year.
“We are going to have to approve measures that once and for all defend consumers from abuse by powerful sectors, oligopolies and monopolies,” Ms Fernández said in an annual address to Congress.
Suffering from a sharp drop in support, from 42 per cent in December to just 25 per cent now, in large part because of economic problems, Ms Fernández is attempting to impose price controls introduced at the start of the year on almost 200 supermarket items, with threats of fines or closure for offending stores.
Cabinet chief Jorge Capitanich, who accuses “speculators” and “unscrupulous businessmen” of pushing up beef prices, threatened last month to step up intervention in the beef sector, which has already suffered almost a decade of export restrictions and price controls that have forced many cattle farmers out of business.
Agricultural produce from beef to soya accounted for almost half of Argentina’s $83bn of exports in 2013, making it the country’s single most important source of foreign exchange since a crippling sovereign debt default in 2001 locked the economy out of international capital markets.
Although Argentina took a step forward in its so-called “external financial normalisation” when Spain’s Repsol last month accepted $5bn in compensation after its assets were expropriated nearly two years ago, the government remains heavily reliant on agricultural exports.
Indeed, it was an alarming decline in central bank reserves, plunging below $30bn by the end of last year from $42bn a year earlier, that triggered a 20 per cent devaluation in January – but economists warn that this could further fuel inflation, after prices rose 3.7 per cent in January alone, according to a new official consumer price index announced last month.
Already, restrictions introduced on beef exports since the devaluation have caused them in February to drop to half January’s levels, despite the fact that rising global beef prices could be advantageous for Argentine farmers.
Instead, over the past decade, and particularly since a bruising 2008 conflict with striking farmers over export taxes, government meddling has caused Argentina’s stock of cattle to shrink by more than 10m head to a low of 48m in 2011. The country has fallen from its position as the world’s third-biggest beef exporter to 12th place, now lagging behind smaller neighbours Uruguay and Paraguay. Exports accounted for 20 per cent of production in 2007, but have now fallen to just 7 per cent.
“These are alarming statistics,” says Rubén Ferrero, president of the Argentine Rural Confederation.
Nieves Pascuzzi, an economist at the Argentine Rural Society, argues that fixing prices is not the answer. “If you want cattle production to grow, we need stable policies for the long term,” he said.
“It’s no good changing the rules of the game every three months.”
Under such conditions, many farmers have switched from raising cattle to growingsoya, a business that has boomed in Argentina over the past decade, benefiting in particular from rising demand in China that has caused prices to soar.
Soya exports have become so fundamental to the Argentine economy that the government is eagerly awaiting the harvest that begins soon to bring in a fresh supply of foreign exchange to top up central bank reserves.
The likes of Mr Hernández glimpse a nightmare scenario in which the production of soya could continue to displace that of beef, forcing Argentines one day to have to make do with soya burgers. “I might wither away if I had to become a vegetarian,” he says.
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