AMERICAS As rising food prices continue to threaten food security around the world, one obvious solution is being largely ignored: Brazil. The country has enormous reserves of unused arable land, most of it currently serving as under-productive pasture, that could easily and cheaply be turned over to production of grains and other foods. The problem is that much of Brazil’s farm produce continues to face prohibitive tariffs and other barriers to developed markets in Europe and the US.
“The correct response is to give priority to dealing with hunger, with access to foodstuffs and to food production in poorer countries” Celso Amorim, Brazil’s foreign minister, told the FT last week. “And to give priority to tackling the root of the problem: the enormous subsidies in rich countries that undermine production in developing nations. World hunger is not a result of a lack of supply, but principally of the low income levels in poor countries.”
Brazil has its share of the blame. The country has been remarkably backward in lobbying developed-world governments and spreading the word about its huge productive capacity. It has done little to combat hysteria over the supposed threat of ethanol to the Amazon forest, for example: a threat that, if it exists, owes more to lawlessness in the Amazon region than to economic imperatives of ethanol production.
But the developed world appears purposely myopic in relation to the opportunities Brazil presents. Just raising intensity of cattle production from the current 0.8 animals per hectare to 1.2 animals (a target already far exceeded in many parts of the country) would release about 80m hectares of land for crops. But that would upset wealthy US and European farmers – a price apparently not worth paying.
Half moon rising
Bolivia’s rumbling political crisis is set to enter a more dangerous phase on Sunday when leaders of the opposition eastern department of Santa Cruz seek popular backing for their autonomy plans in a referendum. The vote is the first of four that will take place over the next two months. (Beni, Pando and Tarija, the three other departments of the so-called half moon, will hold similar polls). With some government supporters determined to stop this process by force, there is a real risk of increased violence.
Indeed, listening to the rhetoric it would be easy to conclude that Bolivia is on the edge of a civil war. The governor of Santa Cruz has said that the approval of the new autonomy statute for his department will create a “new republic”, while the government and particularly its allies in Cuba and Venezuela have been quick to spot an imperialist plot to divide the country
All this has injected a note of urgency into international efforts to ease tensions, with the Organisation of American States playing a particularly important role. (See the speech on Saturday by José Miguel Insulza, secretary general of the OAS).
But despite all the drama, some kind of negotiated settlement, based on the de facto concession of greater autonomy for Santa Cruz, is the most likely outcome. For all their bluster the authorities in La Paz are not prepared to impose their will by military force. Remember, both President Evo Morales and his deputy Álvaro Garcia Liñera are self-professed pacifists. And neither the police nor the armed forces have much of an appetite for quelling internal disturbances. During last year’s unrest in Sucre, for example, policemen fled their posts demanding guarantees for their safety from the public, a surreal inversion of the norm.
At the same time, none of the rebel departments want complete independence. Local businesses still depend on the western part of the country, either as a market or as a transport route to markets elsewhere. They know that the half moon does not have a future as a separate state without the backing of Brazil and Argentina, the two countries with which it would share borders. That prospect looks as remote as ever.
Farm truce
Seasoned observers of Argentina’s often Machiavellian politics will make much of the presence of senior farm leaders in the front row at last week’s inauguration of Carlos Fernández, the new economy minister. Their presence, the reasoning goes, must signal that a deal is at hand to resolve a farm battle that has sparked the biggest political crisis in five years.
Indeed there are promising signs. Some farmers’ leaders want to extend the month-long truce they announced after 21 days of protests over the imposition of a new sliding-scale export tax, which they say effectively sets maximum prices for the commodities exports that are helping the economy to boom. The truce is up on May 2.
But there has been little public sign of progress in talks so far. Former president Néstor Kirchner, returning to centre stage after taking the helm of the Peronist party, has launched tirades against the farm sector in speeches to party followers.
The government wants to give Guillermo Moreno, the powerful internal trade secretary, the ability to block meat, cereal or other agricultural exports if he thinks domestic price controls are not being respected. In the energy sector, similar policies have scared off investment, sending reserves nosediving and putting Argentina on course to being a net energy importer within a few years.
Schizophrenic policies and an apparent refusal to combat inflation are having serious social consequences too: a study by Sel, a consultancy, reveals that poverty in Argentina is growing despite a booming economy and wage rises.
Meanwhile, farmers are delaying their wheat planting and reducing the acreage to be sown with wheat, pending a clearer picture of prospects for the sector. Major customer Brazil is shopping around for new wheat suppliers to make up for Argentina’s export unpredictability. The government and farmers need to find lasting solutions, and the clock is ticking.
Mexico’s surprising resilience
Mexico watchers are long accustomed to seeing the economy nose dive whenever the US falters. But when the government announces first-quarter growth figures next month, there may be some pleasant surprises.
According to a recent report by Morgan Stanley, Mexico’s economy grew as much as 3.5 per cent compared with the first quarter of 2007, almost as much as the 3.8 per cent registered at the end of last year.
At a time when the US economy is softening rapidly and banks are having their worst time in decades, such a figure would be no mean feat. After all, this is a country in which roughly 80 per cent of exports go to the US.
Some of the explanation for this relatively better performance has to do with the nature of the US downturn. But a lot also has to do with the fact that over the last decade, Mexico has made startling progress in putting its house in order.
In spite of recent pressures, inflation has remained well under control and within the 3-4 per cent range for several years now. At the same time, the government now handles its public finances responsibly.
In 2000, the government was still running a fiscal deficit: today, it is running a balanced budget. Back then, about half the country’s public debt was denominated in foreign currency: today 80 per cent of it is in pesos, minimising the risk of external shocks.
All this has allowed the central bank to keep interest rates low which, in turn, has helped generate internal demand that will prove vital for keeping Mexico’s economy ticking over this year – even when some analysts are predicting growth of just 0.5 per cent in the case of its northern neighbour.
There is no doubt that Mexico must grow more if it is to solve its long-term problems. But given the present circumstances, it is likely to survive this year more or less unscathed.
