Brazil & Southern Cone - July 2013 (ISSN 1741-4431)

Once as unthinkable as Cuba importing sugar, Argentina is faced with the prospect of importing wheat. And to rub salt into wounded national pride, Argentina, formerly dubbed the world’s bread basket, could need to turn to neighbouring Uruguay to replenish a near-empty basket. The Argentine government of President Cristina Fernández has reacted in belligerent fashion, blaming wheat producers for price speculation, and digging up a tough old law which would punish suspected hoarders with a prison sentence. Opposition legislators, however, claim that the government is allowing wheat contraband from Uruguay to enter the country in a desperate bid to push bread prices down ahead of key mid-term legislative elections in November.

The Argentine government does not accept that there can be a wheat shortage in what was previously the world’s largest producer, and the powerful domestic trade minister, Guillermo Moreno, is refusing to countenance importing wheat from Uruguay: “not even if I were blind drunk would I allow the import of wheat,” he said bluntly. As one Uruguayan commentator put it in the national daily El Observador on 12 July “the very idea of importing wheat is seriously embarrassing. It would be a heavy blow for national self-esteem… something akin to Saudi Arabia all of a sudden having to import oil”.

Bread prices in Argentina have risen to as much as Arg$20 (US$3.70) a kilo in recent weeks. The worry for the Fernández administration, with legislative elections looming in October, is that the high cost of bread could entail a higher political cost as those most affected are its working class support base. The government has launched a media campaign extolling the virtues of home baking in the face of the high bread prices and scarcity, even posting a recipe on a government website, but this is no palliative.

As such, Moreno, the architect of inflation-massaging and state intervention in various markets (such as wheat, beef and milk), resorted to dusting off a strict pre-dictatorship law on 5 July which asserts as an overriding priority the need “to cover the needs of the Argentine people”. Moreno published the 1974 “law of shortages” in the official gazette. It empowers the government to intervene in an industry to apply tough sanctions when producers are suspected of not supplying the domestic market on purpose with the aim of causing social destabilisation, or speculating on rising prices.  This includes a six-month prison sentence.

Moreno, on the one hand, describes the crisis as a media concoction designed to damage the government’s image, and, on the other hand, entertains the conspiracy theory that farmers are hoarding wheat to have an electoral impact. The government is deeply suspicious of the country’s four farming unions which united in protest against the government’s export tax targeting the agricultural sector five years ago, contributing to the government’s sub-par performance in the last legislative elections in 2009.

The farming unions argue that there is a genuine wheat shortage because of the government’s policies, which have forced many farmers producing wheat out of business or to switch to more profitable alternatives. Domingo Capeloni, president of the Argentine pro-wheat association (Asociación Argentina pro Trigo) laid the blame full square on the government. He said state intervention and the export tax meant that it was no longer commercially viable to grow wheat and the surface area given over to wheat cultivation in the last harvest (2012-2013) was “the lowest in 110 years”.

The president of the Sociedad Rural Argentina (SRA) union, Luis Miguel Etchevehere, said that before state intervention began, and the export tax was introduced, between 16m and 18m tonnes of wheat were being produced per year, with domestic consumption just 6m tonnes. But last year, with profit sucked out of the sector, and a poor harvest to boot, production fell to just 9m tonnes.

“Today in Argentina, wheat costs some US$500 per tonne, twice that of Uruguay,” Etchevehere added. Uruguay also happens to possess stock of 690,000 tonnes of wheat; with domestic demand of just 200,000 tonnes before the next harvest, Uruguay will need to offload some of this surplus.

Argentine Deputy Carlos Brown, of the opposition Frente Peronista, is convinced it is already doing so despite Moreno publicly having emphatically ruled out importing wheat. Brown denounced that contraband wheat from Uruguay was entering the country through ports in Entre Ríos and Buenos Aires with “the connivance of government officials”. He is demanding an investigation.

• Wheat export figures

On 10 July the Montevideo government revised down its export growth figures for 2013 by 3.2 percentage points from 8% to 4.85% on the back of a poor wheat harvest. Ironically, even though the annual export forecast was reduced, overall exports in the first half of the year were US$4.63bn, 6.4% higher in the first half of 2013 than the same period of 2012. This as Uruguayan exporters managed to find new markets in places such as Egypt, Tunisia and Greece for some other profitable agricultural exports such as soya beans, exports of which increased by 16% year-on-year in the first half of the year. End box

Artigas felt Argentine

As the Uruguayan media revelled in Argentina’s current wheat predicament, President Cristina Fernández appeared to try and prick Uruguayan national pride. Fernández insisted on more than one occasion in late June and early July that Uruguay’s national independence hero, José Gervasio Artigas, felt Argentine at heart.

She claimed that Artigas began his testament by saying “I, Gervasio Artigas, Argentine, born in Banda Oriental.” Fernández said Artigas had wanted one big, united Argentina. She said it was important to “tell history as it really was”. Historians have cast doubt on the authenticity of this testament, and Uruguayan opposition legislators took to Twitter en masse to attack Fernández’s comments. “In history, as in politics, there is nothing worse – even if it is sometimes amusing – than caricature. Because it plays with reality, but deliberately deforming it,” former president Julio María Sanguinetti (1985-1990 and 1995-2000) said. He accused Fernández and her deceased husband and predecessor, Néstor Kirchner (2003-2007), of being past masters at this, while palpably failing to defend the separation of powers, which Artigas upheld.

Abortion law stands

On 23 June, Pablo Abdala of the centre-right Partido Nacional (PN) and other pro-life legislators recognised defeat in a national consultation on whether to hold a national referendum to repeal a controversial October 2012 law decriminalising abortion in certain cases. According to Uruguay’s electoral court, on 99.77% of the count, just 8.88% of the national electorate (of 2.6m) supported the proposal, far short of the 25% necessary to call a referendum. The result leaves intact the October 2012 law, which was promoted by the leftist Frente Amplio (FA), in government under President José Mujica.

The 22 October 2012 ‘Sexual Health and Reproduction Law’ makes Uruguay only the third country in Latin America with abortion legislation in place (the others are Cuba and Guyana). Uruguay’s legislation permits abortions carried out before 12 weeks by a doctor, on the stipulation that a woman seeking to terminate her pregnancy receive appropriate counselling.

• Inflation

Inflation for the first half of 2013 reached 4.84%, according to the national statistics institute (INE), leaving the government just about on track to avoid the dreaded double-digit annual inflation. The consumer price index for June increased by 0.43%. Annualised inflation in June stood at 8.21%.

• Medical tourism

While there are no official figures on the number of abortions carried out to date under the new abortion legislation, in late March, the deputy public health minister, Leonel Briozzo, told reporters that “between 300 and 400 abortions” were taking place a month. Given that Uruguay’s total population is just 3.0m, that prompted speculation that women were travelling in from Argentina and Brazil to have abortions.