October 20, 2014
Gov’t to insist on reinstating Grain Board?
For The Herald
The Cristina Fernández de Kirchner administration has blamed farmers for not selling soybeans and, thus, causing the ongoing reserve losses in the Central Bank. For that reason, Cabinet Chief Jorge Capitanich and Economy Minister Axel Kicillof held three meetings with CIARA-CEC, the organization representing grain export companies, in order to ask them to sell the remainder from the 2012-13 harvest (2012-13), as well as advancing the 2013-14 outlook. In that meeting, the export companies assured that they estimated the next harvest, beginning next month, at 27-29 billion dollars.
At the same time, Senator Silvina García Larraburu (Peronist-Río Negro) dusted off an old policy: the National Grain Board. Entre Ríos Governor Sergio Urribarri, a CFK ally, insisted on it.
The pro-Kirchnerite intellectual group Carta Abierta accused multinational firms of going ahead with a “financial stranglehold” against the CFK administration, and suggested that the government should take over foreign trade. Deputy Carlos Kunkel (Victory Front-Buenos Aires province deputy) asked for a grain board “not to monopolize but to give farmers the option: whether to deal with private companies or with the state.”
Despite these statements, Capitanich underlined at the start of the week that there is no proposal for a grain board by the Kirchnerite government “for the moment.”.
The National Grain Board is what the World Trade Organization (WTO) calls State Trading Enterprises (STE), a public office which sets up the rules and regulations of trading crops. Besides, it may be responsible for buying the harvest from farmers, replacing multinational firms like Cargill, Dreyfus or Nidera, and selling the production all over the world. In García Larraburu’s bill, the Grain Board is to “control trade in crops and vegetable oils, guaranteeing their domestic supply.” For that purpose, the Board could “set minimum prices and, when the administration so desires, carry on domestic and foreign trade.” The bill does not end private management of foreign trade.
The National Grain Board was created in Argentina in the early 30s, when the Wall Street crash broke up the general consensus in the world economy, CONICET researcher and economist Alejandro Roftman explained: “The 1930 crisis pulled down commodity prices, which provoked a bad fall in farmers’s earnings. An office was set up to guarantee minimum prices for them.”
“Based on that, the Juan Domingo Perón administration (1946-1955) created IAPI, an office which bought crops and sold them in world trade,” he added. During the presidency of the founding father of Justicialism, the global situation changed — after the end of the Second World War, commodity prices (mainly wheat and maize) suddenly rose and Perón took advantage of this to fund his protectionist industrial model.
The National Grain Board was split up by Carlos Menem, a neo-conservative Peronist, in 1991. In Roftman’s view, “The end of the grain board was rather negative for farmers, who are not strong enough to negotiate with multinational firms as equals.”
Former Board manager Marcelo Regúnaga does not agree with him: “It is a mess to think of a National Grain Board nowadays. It consists of overwhelming public expenditure when the government does not have the money to pay salaries. You need 20 billion dollars in three months. Besides, you need a smart state, with highly qualified officials, and the state these days is incompetent. It does not even know what wheat stocks are.”
“I think that essentially foreign trade should be privately managed. A more highly skilled state could set up rules and regulations and control it,” Regúnaga added.
García Larraburu told the Herald that, at the beginning, a National Grain Board could obtain funds from national banks. Her bill creates a Trading Fund, which would receive money from taxes and commercial operations. Indeed, the Kirchnerite senator remarks on the lack of farmers since the Board was liquidated: “From 1990 to 2001, 150,000 farmers disappeared.”
“The main source of foreign currency source is in the hands of 10 multinational companies, who form a bloc capable of wiping out Central Bank reserves if the exchange rate does not satisfy them. The state should intervene the market to ensure the supply of foreign currency,” said García Larraburu to advocate her bill.
In the last harvest, Argentina produced 49 million tons of soybeans, 8.2 million of wheat, 3.1 million of sunflower seed and 32 million tons of maize, according to the Agriculture Ministry. However, experts consider the latter figure inaccurate.
The request for qualified officials is shared by FAA vice-president, Julio Currás: “In this political context, a National Grain Board could lose credibility. We believe in state interventionism, but, when everything is stained with corruption, it is complicated to work properly.” Currás, as a member of the Liaison Board of farm lobbies, asks for “market transparency” and for a “more modern agency” than the board used to be.
One of the voices who strongly demands the Board’ comeback is Pedro Peretti, a farmer opposed to FAA president Eduardo Buzzi, despite still being part of the grouping: “We need public-sector regulations. Undoubtedly, (export companies) are part of a movement aimed at conditioning democracy. We need a federal agency to regulate, not to buy.”
A source close to export multinational firms told the Herald that the government “did not suggest the idea to revive the National Grain Board.” Besides, none of the companies really believes it could become a reality.
“These boards used to work in another world. The few still remaining, in Canada and Australia, are disappearing. What if the farmers don’t want to sell soybeans to the Grain Board?,” the source wondered.
CWB and AWB
Canada and Australia are mentioned as examples of what the CFK administration should do. According to research done in 2012 by Daniela Reale and the late Rogelio Pontón for the Rosario Grain Market, the Canadian Wheat Board (CWB) has to “buy the biggest quantity of wheat at the best price, give the farmers price stability and ensure fair participation in the market.”
The study also added a Gandalf Group survey, in which 65 percent of farmers still gave their support to this state interventionist mechanism.
The Australia Wheat Board (AWB) was a public office until 1998, when it was privatized. Then, it became AWB Limited, and is now the property of Cargill, as stated in its website. It is responsible for Australian wheat exports.
Experts have different opinions on what is the best system. On the one hand, Roftman believes that a National Grain Board “is a perfect state interventionist mechanism, which compensates inequalities. Besides, it is a proper way to speed up halted operations awaiting devaluations or better prices.”
On the other hand, Reale and Pontón suggested “Argentine agriculture should not step behind Canada and Australia,” remarking on the production growth, which reached almost 100 million tons as a whole.