There is no peace forArgentina. South America's former leading economy, long overtaken by Brazil, is probably experiencing the darkest period in its history. Indeed, it was not enoughinflation at historic highs (over 100% in March on an annual basis), the poverty rate over 40%, the debt monstre with the IMF and even a political crisis, given that in October we vote and the current president Alberto Fernandez has already said that he will not be in the game, leaving room for the rise of populisms ready to fan the flames: now there is also the drought. In truth, it has not rained for 3 years, since 2020, in Buenos Aires and its surroundings: since the La Niña meteorological phenomenon appeared, which led to a cooling of the Pacific Ocean, the level of rainfall has been the lowest since it was detected, i.e. for over 30 years. In particular, the shoals hit the area of the capital and the extreme south, in Patagonia, putting a total of 138 million hectares of crops at risk.
Drought in Argentina: crisis for soybeans and corn
It is not a trivial fact, given that the agri-food raw materials they represent over half of the exports of the country, which practically lives on this: exporting products of the earth, in particular the highly sought-after soy, allows the entry of foreign capital, in particular the coveted US dollars, on whose circulation the entire Argentine economy depends, considering that the country has no currency reserves and is attempting to renegotiate a monstrous debt with the International Monetary Fund, equal to 44 billion dollars. To give a parameter, soybean crops, which they are the most affected due to the scarcity of rains, they have reduced their capacity by 50% in these three years, burning the beauty of 14 billion dollars in exports alone in the last production cycle (estimate by the Rosario Stock Exchange). Together with but, soybeans represent 40% of dollars entering Argentina, and this disaster has already caused it to lose its title as the world's leading exporter of soybeans, to the advantage of neighboring Brazil.
Farms are also on their knees due to drought
In the 2022-2023 harvest, soybean production plummeted to 18 million tons, from around 54 million tons eight years ago. The wheat harvest has also halved, from 22 to 11 million tons, and maize production has returned to 2012 levels. The drought, in addition to crops, is also bringing the farms: according to the National Directorate of Agricultural Risk, they are today throughout the country at risk 21 million head of cattle, an alarming figure considering that one dollar out of every 20 that enter Argentina is due to the sale of beef. And to further penalize farmers there have also been some choices of the government, which has not renounced to apply duties on exports, in particular on soybeans for which the withholding tax is 33% (12% for wheat and corn ).
Clouds on the horizon for the Fernandez
In short, Buenos Aires is facing a double crisis as never before: the financial one, and that of the so-called real economy, both of which are linked to the dollar and to foreign debt. Precisely for this reason, President Fernandez has asked for the intercession of his friend Lula to attempt mediation with the IMF and renegotiate the loan, and also to streamline the commercial exchanges between Argentina and Brazil and not leave the country without raw materials and finished products (Brasilia is the first commercial partner). In this scenario, clouds also gather over the democratic hold of Argentina: Fernandez will leave and Peronism will probably end with him, leaving room for extremisms like Trump and Bolsonaro. According to the press, 80-90% of Argentine agri-food producers plan to vote for populist outsider Javier Milei.
