The “agro dollar” debuts in Argentina, but they foresee a limited effect

A devaluation is not going to solve the effect that the lack of water, frost and hail produced in the regional economies”.

Ernesto Mattos, academic at the National University of José C. Paz

The “agricultural dollar” in Argentina came into force this Monday with the aim of alleviating the effect of the drought in the agricultural sector that brought down the income of foreign currency to the Central Bank (BCRA), in the first quarter of the year. The government expects at least 5,000 million dollars in the shortest term from soybeans in particular, but a private analysis shows that the adverse consequences will persist with greater distortion of prices in the commercialization chain in the local market and more inflation.

In a scenario where the projection of soybean, wheat and corn harvests fell by close to 50% (50 million tons), “at some point there will be no more to anticipate; no incentive will serve for what does not exist,” said David Miazzo, chief economist of the Agricultural Foundation for the Development of Argentina (FADA).

Although he stressed that the “agro dollar” does not solve the background of the problem, Miguel Zonnaras, president of the Córdoba Chamber of Foreign Trade (CaCEC) explained that “to analyze the decision we must start from two points: the severe drought and, in consequently, the fall of reserves”.

In this sense, he warned that the economic damage in the interior of the country can be multiplied by at least 5, due to the dependence on employment -direct and indirect- in agriculture.

overall effect

Far from the grossest calculations, the businessman pointed to the collateral effect that will be reflected in “trucks, fuel, per diems, stays, purchase of inputs in different towns of the country; less repair of machinery; construction and all associated services.” “The virtuous dynamics of the agricultural sector in the interior of the country will generate an inverse effect,” said Zonnaras.

In numbers, Miazzo confirmed that the current volume of reserves, around 1.5 billion dollars, is enough to cover “a week of imports” and, in relation to the “global effect” of the drought, he estimated that he can discount another 2 points to the GDP -some 13,000 million dollars-, above the 20,000 million dollars that the liquidation of agriculture will fall according to different private entities, which already discount between 3 and 3.5 points of the product.

Although analysts are cautious when calculating practically imponderable effects, the projection anticipates a loss of more than 30,000 million for this 2023. In this sense, a study by the Rosario Stock Exchange (BCR), describes that the blow to the “factory to open sky” of the field has been “dramatic” in crops, animals, natural resources with a “gale of losses”.

Only focusing on soybean, wheat and corn crops, the losses for the producing sector exceed 14.140 million dollars.