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

The productivity of the sector and the strength of the large producers and exporters of grains, especially soy, would appear to have not only put the brakes on but actually reversed the decreasing trend for agriculture and increased this sector's contribution to gdp, beyond what the known Chenery standard would dictate,4 as shown below. The standard establishes that for the per capita gdp of Argentina in 2012, the share of manufactures should have been close to 28% of gdp and it should have been 7% for agriculture. Argentina was 10.2 percentage points behind for the former but agriculture surpasses the standard by two points. In other words, at Argentina's level of development, as measured by gdp per capita, the weight of agriculture is above that of the standard, while manufactures demonstrate a severe degree of Dutch disease, or premature deterioration. Still, it must be reiterated that the lower growth of manufactures in Argentina is only marginal and does not reach the severity felt by other countries. For example, this is the case for Brazil, as shown in Table 2. Brazil experienced the crisis of Dutch disease between 1980 and 2000. By 2011, the index of Dutch disease grew 67% due to slight advances in the participation of manufactures in gdp and considerably higher progress for agriculture.

Although there was a lesser bump for manufactures, this does not necessarily confirm what the Dutch disease theory proposes in its entirety, and it is therefore necessary to answer why the manufacturing sector grows at rates not very far from total gdp or agriculture, despite the fact that agriculture is in boom, enjoys significant global demand for soy and a variety of policy supports that have been instituted by successive governments. There are various factors that could explain what elements have softened the effects of the deindustrialization described by the theory.

First, this work would like to emphasize the severity of deindustrialization and de-agriculturalization in the Brazilian economy, a nation which, similar to Argentina, experienced a boom in soy prices and other agricultural products like sugarcane for ethanol. Brazil is the most important Latin American trading partner of Argentina and its principal destination market for manufacture exports. Although it has a lower per capita gdp, equivalent to about 40% of what it is in Argentina, the tradable sectors in Brazil accounted for a much lower proportion of gdp in 2011, and as such, the gap between normal and observed participation is higher, confirming more severe separation from the productive structure. The suggestion is that the increase in demand for manufactures in Brazil, a result of the effects of the movement of factors and spending on their boom, is satisfied mainly by imports from Argentina, given the fact that the two economies are closely integrated and there are preferential duty tariffs for Mercosur.

Secondly, as shown in Figure 7, the accumulated commercial balance of the entire period 1999-2011 was used to finance the outflow of capital from the country, therefore preventing the peso from further appreciation and softening the effects of Dutch disease, while also preventing capitalization in the country.5 This capital left the nation through the payment of interests, remittance of profits and capital flight (deposits abroad, acquisition of non-productive assets abroad, etc.).

Figure 7. Destination of Commercial Balance, Accumulated 1999-2011

Source: Prepared by the authors using indec data.

4 The methodology created by Chenery and Syrquin establishes what should be the structured considered as normal for participation by sector in gdp and employment, in accordance with the level of development of each country, as measured by gdp per inhabitant. The difference between the share of tradable goods and the share observed shows a degree of Dutch disease. In other words, it measures the premature deterioration of tradable sectors. See: Chenery, Syrquin and Robinson (1986).

5 The cumulative amount of all accounts was done excluding 1999, because the last payment corresponding to the privatization of YPF entered, the last large asset submitted to this type of sale. Also, the same exercise was done for the period 2002-2011 to corroborate that the phenomenon observed was not a feature of the exchange rate regime. In this exercise the same behavior is observed for the accounts from 1999-2011, albeit in greater intensity.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 195 October-December 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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