This article was published in a24 Agro on July 8th, 2021.
Global demand for food is expected to grow at a rate of 1.2% per year, almost one point less than during the 2010-2020 period.
In its recent “Agricultural Outlook 2021-2030” report, the Food and Agriculture Organization of the United Nations (FAO) in conjunction with the Organization for Economic Cooperation and Development (OECD), projected a slowdown in the demand for agricultural products globally. A growth rate of 1.2% per year is expected, almost one point less than during the 2010-2020 period. This lower dynamism will be especially noticeable in the demand for cereals, fish, and vegetable oils, which will grow at less than half the rate of the past decade.
This forecast is important for Argentina. Our country is, without a doubt, one of the world’s largest food exporters, and has the potential to grow in its role as a guarantor of global food security. There is practically no report on the state of agricultural production in the world that does not dedicate a section to the Argentine situation.
However, the foundations of this relatively favorable positioning are being eroded. Between 1990 and 2000, the volume of manufactures of agricultural exported increased by 112%. Between 2000 and 2010, however, the increase was 33%. And between 2010 and 2019 it was just 13%. This trend, which was hidden behind an unprecedented rise in international prices, reflects a fundamental deterioration in incentives for production and exports.
The FAO-OECD report itself mentions several public policies that affect Argentina’s agricultural positioning negatively. As usual, what stands out the most is the imposition of export duties, a policy that has been in force for 20 consecutive years and has involved negative transfers of more than 160 billion dollars for Argentine agriculture. No other country among those analyzed in the report has imposed a similar measure. Support policies such as import quotas, support prices, or transfers are actually being applied to the agricultural sector.
Furthermore, the conditions faced by Argentine agricultural companies are more unfavorable than in other countries. In the World Economic Forum’s global competitiveness ranking, our country is positioned 83 out of 141 economies (it is the worst positioned member of the G-20). In the World Bank’s logistics performance index, we are ranked 62nd. We are among the 20 countries with the highest tax burden on companies, according to the Tax Foundation survey. We are also the country with the most unfavorable policies for the agricultural sector according to the OECD Agricultural Support Index.
Where we are headed is also important. The last few years have surprised us, in the bad sense of the word: export ban, increase in export duties, intervention in the markets, state surveillance of cost structures, price controls, etc. In addition, the Executive has boycotted the international negotiations agenda of Mercosur and resisted any type of attempt to liberalize the bloc, a measure that would be beneficial for exports, production, and employment.
Now let’s go back to the future: international demand will be an opportunity, but its slower growth rate indicates that there will be fiercer competition for markets. If national public policy does not change course, by 2030 we will talk about more and more lost opportunities and, perhaps, we will no longer be among the most relevant suppliers of food worldwide (as has happened to us in the past with beef).
It is time to trust the potential of Argentines and lift the barriers to growth. If we do so, we will see Argentina in a much better position than it is at any projection that the FAO or the OECD can make.