Volume 44, Number 175,
October-December 2013
The takeover of soy and dutch disease in Argentina:
an agricultural curse?
Alicia Puyana and Agostina Constantino

In fact, as can be observed, the commercial balance alone was not enough to finance the outflow of capital beyond the sphere of national circulation. This also required financing through the net inflow of foreign investment and the State taking on debt abroad. All of this prevented greater appreciation in the real exchange rate, allowing the industry to continue expanding its levels of activities.

What is the cause behind this capital flight? It could be thought that in situations of boom for a basic product and when there are conditions of opening for capital accounts, if the non-tradable sector is labor-intensive, it will not absorb the capital displaced from tradable goods that are not in boom. Rather, it will leave the circuit of national production.

Finally, one factor related to the Brazilian economy in particular, which could explain why the increase in soy prices has not inflicted more severe contraction on the manufacturing sector, is the appreciation of the exchange rate of the Brazilian real. As can be seen in Figure 8, the exchange rate of the real in Argentina with respect to Brazil has shown a growth trend since 2002. This revaluation of the real vs. the peso has altered the relative prices of manufactures to favor those from Argentina, preventing the country from losing competitiveness in the Brazilian market and slowing or reducing the contraction of the sector's production and share of gdp, in accordance with what would be expected by the theory and in keeping with the intensity of the boom.

Figure 8. Real Exchange Rate Between Argentina and Brazil (Quantity of Pesos from Argentina to Acquire a Real)
Source: Central Bank of Brazil

These circumstances may explain the growth of manufactures or the slowdown of their retreat, as a good part of sales from Argentina to Brazil are manufactures. Their supply and imports are elastic to the exchange rate and prices, more than to customs discounts. In any event, although the economy of Argentina has opened up, it has done so to a lesser extent than other economies, and if the increase in the value of the sales of soy is removed, the degree of openness would be even lower.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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