MercoPress. South Atlantic News Agency

“Industrialization” priority alarms Argentine farmers

Secretary Alfredo Chiaradia

Argentina's decision to favour industrialization, which was made public during global trade negotiations in Geneva, has caused concern among the country's powerful farm sector which has been the engine behind Argentina's strong recovery since the 2001/02 melting of the economy and default.

The announcement was made this week by Argentina's International Trade Secretary Alfredo Chiaradia before the Doha Round World Trade Organization negotiations that is currently discussing the elimination of farm subsidies by rich countries and greater market access for developing countries. "In agriculture events are going to happen with or without negotiations. Commodities' prices are on the rise and there's a guaranteed long term demand with the incorporation of new consumers such as India and China, and through the impact of bio fuels", said Chiaradia in Geneva, adding that "what ever is going on in agriculture (discussions) does not generate much enthusiasm". However, "industrial production and products are essential to Argentina's economic policy; we must by all means avoid the de-industrialization process". Chiaradia's statements did not have a positive reaction among farm organizations which have requested an urgent meeting with the government. Argentina's Industries Union, UIA, on the other hand applauded and praised Chiaradia. "There some things one must share from a technical point of view with Mr. Chiaradia", said Ernesto Liboreiro, head of the International Agriculture negotiations Institute. "It's true that industrial goods production must be framed to a sustainable country project and it's also true that in agriculture some things will happen with or without negotiations. But it's not correct to say there's danger of de-industrialization because protected sectors must be so for a longer period of time and according to their commitments. In Argentina agro-business has been supporting these sectors since the XIX century", insisted Liboreiro. The industries which in Argentina function with a generous protection system are automobile, foot wear, textiles and house equipments. But some farm leaders were not so diplomatic on their comments. "I'm completely convinced that the government has outlined a productive policy in which the camp has not been taken into account and will be deliberately postponed. It's like the old times promoting industry with the money from agriculture", said Nestor Roulet vice-president of the Argentine Rural Confederations. Eduardo Buzzi, president of the Argentine Agrarian Federation warned about the implicit contradictions in the statements. "We can't fall into a camp-industry antimony. If this happens, it's most unfortunate because it confronts sectors which should complement each other", said Buzzi. But a leading member of the Union of Industries Jose Ignacio de Mendiguren supported the new stance. "Developed countries are asking us to lower industries' tariffs in exchange for opening their agriculture markets, but it was promised in 2000 and so far has not happened. The truth is that if the US and Europe don't open up, now we have new markets", said de Mendiguren. The textile sector also praised Chiaradia. "The strength of the current re-industrialization process has been confirmed in international forums and fully ratifies the government's economic policy. We have been enthusiastically surprised with Chiaradia's announcement." Argentina's current economic policy is based on a strong US dollar (competitive exchange rate) which favours exports and home production discouraging imports. Exports are mainly from agriculture and are heavily taxed taking advantage of the strong international prices, which helps finance the budget primary surplus. This means there's a significant transfer of funds from agriculture to the re-industrialization process and domestic consumption which benefits from strong subsidies in certain areas (public utility rates, fuel, transport and even beef, dairy and wheat products by limiting exports). This policy is considered sustainable with strong international demand for commodities and sufficient idle capacity in the economy, while several years lagging investment picks up. However the Central Bank must keep extracting liquidity from money markets to avoid a jump in inflation.