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Exporting food is a blessing: the five benefits it brings to the Argentine economy

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Fresh lemons in a Chinese supermarket. Argentina is the second world exporter of lemons, behind Spain. Agro-export is the only sector that makes a net contribution of foreign exchange to the country

The sayings of an official national deputy, in recent days, that it is a disgrace and even a curse that Argentina is a relevant food exporter do not burst out of place. They come from a political representative of a force (in the government) that in a few months promoted (without success) the nationalization of an important grain exporting company, flirted before with the idea of ​​the old National Grain Board, raised taxes at the time to exports of agricultural products, maintains an exchange rate gap that reduces the price received by exporting producers, restricts access to imported goods for agro-production and temporarily prohibited corn exports.

A historical and erroneous idea is hovering that being competitive and exporting products related to the production of agri-food affects the quality of domestic access to that same production. And this continues to perniciously affect political decisions.

Has said George Gilder that poverty is not a state of income but a state of mind.

Experience shows that, On the contrary, the incentive to produce through the expansion of markets -thanks to exports- leads to more investment, which increases total production and improves productivity. The opposite was exhibited when three decades ago the export of bovine meat was prohibited and the immediate effect of this was the fall in production and the consequent increase in prices due to lower supply.

Of divorces and other fallacies

There is no divorce between domestic and international supply, as shown by the fact that the most exporting countries are those with the best domestic supply (among them the United States, Germany, the Netherlands, Japan). And even the argument that being a food exporter affects domestic consumption is fallacious when it is found that half of all food traded internationally on the planet is exported by the European Union and the United States.

The countries that export the most are those with the best domestic supply, including the US and Germany. Netherlands, Japan. And the argument that exporting food affects domestic consumption is fallacious: half of the food that is traded internationally comes from the European Union and the United States.

For Argentina, being a relevant exporter of agri-food products is a virtue. 70% of total Argentine exports of goods (55,000 million dollars in 2020) is made up of products from the agri-food chain, within which there are goods called primary (grains, fruits, fish), intermediate manufacturing goods (bulk vegetable oils, pelletized flours, concentrated juices) and final goods (wines, candies, dairy). Agro-production is precisely the only area in which Argentina ranks among the 15 largest exporters in the world. Contrary to the sensu, if all the products exported on the planet are considered, Argentina barely reaches 50th place in the world ranking of exports by country.

Argentina barely generates 0.3% of total world exports if all items are counted, but in agricultural and food exports it generates 2.05% of the global total, almost seven times more.

If the dreaded bid between exports and local prices (which are internationalized) occurs (as has been hinted), this occurs because internal distortions reduce the purchasing power of the Argentine salary, high domestic taxes impact local prices, Macroeconomic disorder prevents investment and the closed economy reduces competition.

Green I want you green

The production and export of agro-food drives from the development of genetic engineering to that of agricultural machinery and tractors, the local production of pick-ups, software dedicated to the production and mobilization of trucks and the entire logistics sector.  In addition, it mobilizes the banking sector and provides the dollars that the country desperately needs
The production and export of agro-food drives from the development of genetic engineering to that of agricultural machinery and tractors, the local production of pick-ups, software dedicated to the production and mobilization of trucks and the entire logistics sector. In addition, it mobilizes the banking sector and provides the dollars that the country desperately needs

In truth, there is another effective and not hypothetical (among others) misfortune among us: the shortage of dollars. And it must be said: it is a blessing that the agri-food export sector contributes more than 40,000 million dollars a year to Argentina in foreign sales and demands, on the contrary, very few imports (about 8,000 million dollars annually). For this reason, it is the only item that generates a comfortable intra-sector external surplus, obtaining net dollars that the other productive items do not generate (they are in deficit, because they import more than what they export, industrial manufactures; minerals, energy and fuels; and services).

Five benefits

Unlike those who fear exports, the countries that export the most benefit in 5 ways: they improve the quality of their production due to international demands; they raise the condition of employment because international companies must invest in people; they endure less exchange stress because they receive productive dollars in addition to financial ones; they raise the investment rate (domestic and international, because cross-border trade does not occur without participating in cross-border value chains); and they contribute to the entire local economy by increasing total production, infecting supply chains and increasing tax collection.

The economy of the third decade of the century is global. And Argentina participates in it essentially through international agri-food production. It is true that the bulk of Argentine exports in this sector are inputs and not final goods, but this must be analyzed in the light of two realities: To export products with greater manufacturing, it is necessary to achieve quality investment that is justified in the participation in international production chains to which 70% of world trade enters, but only 35% of the Argentine (as an effect of the autonomist isolation of the Argentine productive regulatory model that should be made more flexible); and on the other hand, the fact of exporting few final goods does not escape too much from the reality of world trade encouraged by cross-border chains, since only 20% of everything exported in the world by all countries are final goods and the main components of goods traffic between countries are products that complete production processes in supranational networks.

It is curious that a country that counts more failures than successes takes so much pity on its failures and laments the effects of its virtues. So fearful of the risks of success and so neglectful of the negative consequences of failure. Perhaps it is that mania that prevents the expected economic jump.

Agri-food export, therefore, is the most virtuous in our country. And if a systemic vision is achieved (the economy is no longer divided into areas but integrated into ecosystems) it can be understood that thanks to the fact that there is a very competitive exporting agri-food sector there is an environment for Argentina to have generated advanced genetic engineering, production automotive -from pick-ups and utility vehicles- to supply the sector, software dedicated to agricultural production, transport and logistics services that travel through our backward routes and roads carrying cargo, manufacture of processed food that we consume internationally and even tax collection by the highest taxes in the world that enable social policies.

Dice Paul Romer that economic growth occurs whenever people take resources and rearrange them in various ways to make them more valuable. That happens, at least, with Argentine agri-food.

It is curious that a country that counts more failures than successes takes so much pity on its failures and laments the effects of its virtues. So fearful of the risky effects of success and so neglectful of the negative consequences of failure. Perhaps it is that mania that prevents the economic jump for so many years expected.

Confucius already believed that it is not the weeds that choke the good seeds, but that this happens because of the negligence of the peasant.

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Ben Oakley
Ben Oakley is the guy you can really trust when it comes to Mainstream News. Whether it is something happening at the Wall Street of New York City or inside the White House in Washington, D.C., no one can cover mainstream news like Ben. Get a daily dose of Trustworthy News by Ben Oakley, only at Globe Live Media.