4.4 The Reforms
The reforms essentially consisted of three parts:
- complete deregulation of trade;
- transfer of terminal facility elevators to new owners; and
- transfer of phytosanitary activities to the Secretary of Agriculture.
The complete deregulation of the grain trade meant that existing and new domestic and international traders were free to compete and participate in the trade. The transfer of facilities (which occurred via open tender) and the freedom to construct new facilities enabled new entrants and existing firms to develop the infrastructure they needed. Infrastructure privatization even included the concession to four private enterprise groups of the cargo railway networks that serve the "Pampean" region. Funds from the sale of assets were all retained by the Argentine government. The private firms carry out their own promotion. However it should be noted the government does fund programmes "to increase efficiency in the provision of public services to the agricultural sector (Anon, p130). The activities of the Secretariat of Agriculture do appear to generate significant information flows that benefit some interested parties.
Despite the reforms the government has maintained significant roles within the agricultural sector. The Government has an important role with regard to quality assurance. Technical committees validate details about plant varieties and maintain registries. In addition, 300 laboratories spread all over the production region analyze the quality along the various trade stages, with the support of six laboratories belonging to the Arbitration Chambers and the central laboratory of the Agriculture, Fisheries and Foodstuffs Secretariat. Further, the Banco de la Nación Argentina (BNA) is involved in financing export activities and production in some regions (Anon, pp127,177). It also states its support for the development of cooperatives "for the production of goods for export".
4.5 The Outcomes
The outcomes of the reforms are hard to quantify in prices paid to farmers due to difficulties to date in obtaining price data. However, improvements are obvious in terms of costs reductions and investment in infrastructure. Further there is evidence that benefit has flowed back to farmers as seen in the expansion of farm output.
"Since 1989, the Government of Argentina's highly successful stabilization program has led to large inflows of foreign capital. The long neglected transportation and port sectors were among the major recipients of new investment funds. Results include a 20-25 percent decline in rail freight charges, expanding barge traffic on the Parana/Paranagua waterway from 2 million tons in 1992 to 14 million tons in 1997 and Panamax sized vessels calling on upriver ports. Other investment has led to increased loading rates and a tripling of grain storage capacity at major ports" (USDA FAS March, 1998).
"Now, growing grain handling capacity is being matched by rising grain output. Wheat production has increased from 8.4 million tons in 1989 to 14.3 million, while coarse grain production has jumped from 7.3 million tons to 21.2 million. More importantly, during the last seven years coarse grain yields have risen twenty-five percent, with wheat yields up twenty percent" (USDA FAS March, 1998).
"While Argentina's domestic consumption of wheat has remained fairly stable over time, investments in fertilizer and equipment have soared, new farming technologies have been adopted, and planted area has steadily increased during the 1990's. When this was combined with last year's near-perfect weather the result was not only a record wheat crop -- a full one million tons above the previous high -- but record corn, soybean and rice crops as well; a Grand Slam not commonly seen in the same country during a single crop cycle. However, limited storage capacity and fears of transportation bottlenecks forced the bulk of the wheat crop immediately into export channels, reducing global prices to seasonal lows and depressing grower returns. Still, the ports were able to handle nearly 2.5 million tons of wheat in December alone (the previous monthly record was 1.5 million) and the nation's total storage capacity is increasing at a rate of two million tons each year"(USDA FAS September, 1997). The net result is that now Argentina is competing vigorously with other major countries participating in the wheat market. The removal of the monopoly if anything seems to have sharpened their ability to face international competition.
4.6 Future Issues in Argentina Wheat Marketing
The current reforms have improved performance but two issues remain important. Firstly, the deregulated market has provided farmers with all the opportunities and risks of the market. It appears there is still a lot of learning to be done by farmers as to appropriate decisions for managing their risks. Secondly it appears there is limited grain storage on or near the farms and this limits farmers considerably in their trading decisions. Both of these issues can be addressed without substantial structural reform.
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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