Volume 44, Number 175,
October-December 2013
The Takeover of Soy and Dutch Disease in Argentina:
An Agricultural Curse?
Alicia Puyana and Agostina Constantino

Since the beginning of the first decade of the twenty-first century, the boom in demand for “flex crops” (those that can serve as food, fodder and inputs for biofuels), stimulated increases in production, especially for soy, accelerating growth of this product in Argentina. The cultivation of soy in Argentina has grown strongly since the mid-1990s.

This section attempts to evaluate the possibility that Argentina has Dutch disease, that is, that the boom experienced by the soy producing sector – leading to the appreciation of the real exchange rate – affects the productive structure and bears on a premature setback to tradable sectors that are not in boom. However, this country has a highly efficient agricultural industry as well as for inputs with diverse uses (steel, aluminum, etc.), which could benefit from the soy boom, as long as inputs for this crop require supply with national production (assuming that Argentina produces them at prices close to international prices). If this is the case, the movement of factors (labor and capital) would be directed towards these manufacturing activities. In this sense, soy activities could even attract resources (capital, as well as labor and land destined for other uses) without necessarily being detrimental to the resources available for other activities (as long as there is an abundance of capital).

According to Bisang (2011), there is something peculiar to the case in Argentina that distinguishes it from the typical case assumed by the theory: sector profits (in this case, the soy sector) were not generated only based on improving prices for a given quantity of national resources, but rather by incorporating technology into the sector (which increases the amount of land that could be cultivated by incorporating new land, increasing yield per hectare and the profitability of capital). In this sense, according to the author, the key point in Argentina should focus on public policies that target the real exchange rate without affecting incentives to innovate. For example, according to the author, this might include developing new varieties of seeds suitable for the soil in Argentina.

Soy prices have been on the rise since 1999. As can be seen in Figure 1, the polynomial trend reveals a peak in 1971 and later falls along the trend until 1999, at which point it starts to grow again. This is what José Antonio Ocampo (2011) called “super-cycles” of the prices of non-oil raw materials; in other words, long-term cycles that respond to changes in the global economy, both in terms of growth dynamics as well as the specific technological aspects of each stage. The author has identified four super-cycles (for the price of all non-oil raw materials) since the agro-export stage, more precisely since 1884: 1884-1932; 1932-1971: 1971-1999; 1999-present day.2

Figure 1. The Price of Soy in Constant 2005 Dollars

Source: Prepared by the authors using the World Bank.

Returning to Figure 1, it is clear that during the current super-cycle, the price of soy grew 98.5%. This is a very intense and long-lasting boom in international prices (13 years). Similar to in other cases (Costantino, 2012), the following reasons could be proposed to explain this boom, as well as factors that go beyond considerations of the balance between supply and demand. These are as follows, in no particular order of priority: i) increase in oil prices (which influences food by increasing production costs and increasing the demand for food to produce biofuel); ii) depreciation of the dollar since the 1970s (which affects the price of food by increase the demand of buyers of raw materials whose revenue is not in dollars) and iii) financial speculation, referring to speculative and financial investments in the soy market, which would be another factor that influences the price of soy (Cooke and Robles, 2009).

2 According to Ocampo, the percentage of increase in prices during each boom is lower than the time before, which the Prebisch-Singer thesis would confirm in terms of the trends in the dropping prices of raw materials. In fact, Erten and Ocampo (2012) calculate that the percentage of growth in the price of temperate climate agricultural products in the last super-cycle was 59.7%, while it was 66.1% in the previous super-cycle.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 192, January-March 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,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Alicia Girón González. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: Feb 23th, 2018.
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