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

As shown in Figure 9, there is a decently high correlation (they follow nearly the same behavior) between industrial production in Argentina and industrial exports to Brazil. In other words, a good portion of the “recovery” of the manufacturing sector was a result of the “protection” granted by the devaluation of the peso in 2002. A large part of this production has also been able to recover due to the price relations that exist with Brazil. To what is this appreciation of the real with respect to the peso responding? There is a fair amount of research that confirms a strong presence of Dutch disease in the neighboring country, and is specified in Table 2. The line of thinking goes that the higher the appreciation of the real than the peso (with respect to the dollar), the more Brazil respond to the effects of its own boom by growing its manufactures imports from Argentina and in this way absorbing and mitigating the Dutch disease felt in Argentina. In other words, Argentina benefits from the severity of Dutch disease in Brazil, as its deindustrialization (or import substitution coming from other countries) is reflected in an increase in industrial imports.

Figure 9. Industrial Production in Argentina and Industrial Exports to Brazil (Millions of USD)

Source: Prepared by the authors using BM and INTAL.

What is clear is that although Argentina shows some signs of Dutch disease, some of the more feared consequences (like deindustrialization) have been lessened thanks to the outflow of capital beyond the national productive circuit and the appreciation of the Brazilian real, an effect of the boom of agricultural products. An equilibrium, or two highly unsustainable paths.


One of the most important conclusions of this work is that the outflow of capital from a country has prevented internal accumulation. However, because it prevents accumulation and there is a favorable context in terms of the exchange rate with one of the principal countries purchasing Argentinean industrial products (Brazil), the industrial sector has not suffered the expected contraction and was able to sustain its share in the gdp over the years (although the index of Dutch disease has not been reversed for neither industry nor agriculture). Clearly, deindustrialization through these two paths is unsustainable in the long term, and as such, active industrial policy and protection for this sector will be required.

As Rodrik (2009) ascertains, for developing nations to grow, they require a global economy that can absorb rapid increases in the supply of goods they produce. To this effect, mid-range income nations, producers of raw materials, should consider, according to the author, implementing measures explicitly targeting industrial promotion (even subsidies) for non-traditional tradable goods. This type of subsidy may increase their supply, but do so with neutral effects on the commercial balance. Effectively, industrial policy could acquire the goal of structural transformation, like the exchange rate to the external balance. According to Rodrik, eliminating the real exchange rate as a tool for development would not come at a cost to larger developing countries. However, failing to realize that there are alternative methods to use as substitutes could, in large measure, increase adverse effects on growth.

The objective of this work was to explain the trajectory of the manufacturing sector in Argentina, to assess whether it showed symptoms of Dutch disease. This work therefore did not propose to recommend policies to aid the country in resolving its poor industrial performance based on our explanation. This task will be left to the consultants and expert analysts in public policy. However, some suggestions may be made separate from the study, linked to the channels through which Dutch disease is transmitted: avoiding a revaluation of the real exchange rate and defending other tradable sectors, expanding public spending to increase the productivity of tradable sectors not in boom and implementing stimulus for their exports, and, finally, converting extraordinary income of the public sector as a permanent method to one, contain revaluation and, two, reduce the risks of price and fiscal revenue instability.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 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: Nov 13th, 2017.
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