Argentina ranchers turn to China amid credit drought

Exports of beef from Argentina to the world’s second-largest economy have multiplied, as farmers tap Chinese demand for meat to help pay their bills as access to credit has dried up. (Reuters)
Updated 17 July 2019

Argentina ranchers turn to China amid credit drought

  • Exports of beef from Argentina to the world’s second-largest economy have multiplied, with shipments in the first five months of the year to Chinese ports representing 72 percent of Argentina’s total 180,000 tons of beef exports, according to CICCRA
  • Tight monetary policy and high interest rates squeeze farming sector

BUENOS AIRES: Argentina’s world-famous ranchers are culling their breeding cows at the highest rate in 30 years and tapping Chinese demand for meat to help pay their bills as access to credit has dried up for farmers in South American’s No. 2 economy.
The trend underscores how Argentina’s tight monetary policy and high interest rates hovering around 60 percent are squeezing the sector, which relies on up-front investment to maintain valuable cow herds and rearing calves over several years to maturity.
“The farmers, with no real source of financing, are now looking for liquidity through these cow sales,” said Carlos Achetoni, president of the industry association Argentine Agrarian Federation (FAA).
Argentina’s meat industry chamber CICCRA said in the first half of 2019 females represented 50.1 percent of slaughtered animals, the highest level in the past three decades and well above the maximum sustainable rate considered to be around 43 percent.
This trend could cut the herd by up to 400,000 head of cattle by 2020 from a total of around 53 million in March.
“It’s a survival decision,” said Miguel Schiaritti, president of CICCRA, who said ranchers were having to think short-term and get rid of their assets because they could not borrow at current rates.
“For ranchers the cow is the machine to produce calves. It’s as if someone who manufactures bolts sold the machine which makes the bolts to finance themselves and pay their expenses.”
Farmers said that Chinese demand was a silver lining, ensuring that these sales were at least proving lucrative.
Exports of beef from Argentina to the world’s second-largest economy have multiplied, with shipments in the first five months of the year to Chinese ports representing 72 percent of Argentina’s total 180,000 tons of beef exports, according to CICCRA.
China mainly demands cheaper cuts of beef from female cows — which better suit local cuisine more focused on shared dishes than prime cuts of steak — which has boosted the price of the category by 88 percent versus a year ago to an average of 43 pesos ($1.01) per live kilo in Argentina’s main livestock markets.
Farmers sell the cows to local slaughterhouses, which in turn ship the meat to global buyers including in China.
Carlos Iannizzotto, president of Argentina’s association of rural producers CONINAGRO, said unusual “sky-high” prices from China helped, though the core issue was still farmers’ finances.

FASTFACT

China acounted for 72 percent of Argentine beef exports in the first five months of the year.

“China exports mean at least producers don’t have to give the cows away, they can get a good price. That’s a blessing,” added Schiaritti.
Officials at industry bodies added a recent, landmark deal between the South American Mercosur trade bloc and the EU — that included a larger quota for meat exports — would do little for now to resolve the crisis facing Argentine ranchers.
The bloc made up of Argentina, Brazil, Uruguay and Paraguay, struck a free-trade agreement in June after two decades of talks, providing for the entry into the EU of an annual quota of 99,000 tons of beef at a 7.5 percent tariff.
“The agreement is just pain relief really,” said Schiaritti, whose CICCRA chamber has said that because of the limited volume — shared between the four countries — the export boost from the deal would not be that major.
FAA President Achetoni added that ito benefit from the deal, ranchers first needed authorities at home to solve the issue of access to credit, otherwise farmers would continue to be squeezed and the cattle herd would decline.
Argentina’s high benchmark interest rate, set by daily central bank auctions, has helped to bolster the local peso currency after it tumbled last year, but choked off access to credit, especially for small businesses and farmers.
“Before we can even really talk about getting into international markets, we need to resolve the issues of taxation and access to finance (at home),” Achetoni said.


Squabbles erupt as G7 leaders open summit in French resort

Updated 25 August 2019

Squabbles erupt as G7 leaders open summit in French resort

  • Disputes on trade, climate may eclipse Macron’s agenda
  • EU’s Tusk warns of lack of global unity, spars with Johnson

BIARRITZ, France: Squabbles erupted among G7 nations on Saturday as their leaders gathered for an annual summit, exposing sharp differences on global trade tensions, Britain’s exit from the EU and how to respond to the fires raging in the Amazon rainforest.
French President Emmanuel Macron, the summit host, planned the three-day meeting in the Atlantic seaside resort of Biarritz as a chance to unite a group of wealthy countries that has struggled in recent years to speak with one voice.
Macron set an agenda for the group — France, Britain, Canada, Germany, Italy, Japan and the United States — that included the defense of democracy, gender equality, education and the environment. He invited Asian, African and Latin American leaders to join them for a global push on these issues.
However, in a bleak assessment of relations between once-close allies, European Council President Donald Tusk said it was getting “increasingly” hard to find common ground.
“This is another G7 summit which will be a difficult test of unity and solidarity of the free world and its leaders,” he told reporters ahead of the meeting. “This may be the last moment to restore our political community.”
US President Donald Trump had brought last year’s G7 summit to an acrimonious end, walking out early from the gathering in Canada and rejecting the final communique.
Trump arrived in France a day after responding to a new round of Chinese tariffs by announcing that Washington would impose an additional 5% duty on some $550 billion worth of Chinese imports, the latest escalation of the tit-for-tat trade war by the world’s two largest economies.
“So far so good,” Trump told reporters as he sat on a seafront terrace with Macron, saying the two leaders had a special relationship. “We’ll accomplish a lot this weekend.”
Macron listed foreign policy issues the two would address, including Libya, Syria and North Korea, and said they shared the objective of preventing Iran from obtaining nuclear weapons.
Trump later wrote on Twitter that lunch with Macron was the best meeting the pair has yet had, and that a meeting with world leaders on Saturday evening also “went very well.”
However, the initial smiles could not disguise the opposing approaches of Trump and Macron to many problems, including the knotty questions of protectionism and tax.
Before his arrival, Trump repeated a threat to tax French wines in retaliation for a new French levy on digital services, which he says unfairly targets US companies.
Two US officials said the Trump delegation was also irked that Macron had skewed the focus of the G7 meeting to “niche issues” at the expense of the global economy, which many leaders worry is slowing sharply and at risk of slipping into recession.
French riot police used water cannons and tear gas on Saturday to disperse anti-capitalism protesters in Bayonne, near Biarritz. A police helicopter circled as protesters taunted lines of police.
The leaders themselves were gathering behind tight security in a waterfront conference venue, the surrounding streets barricaded by police.

Spat over ‘Mr. No Deal’ Brexit
Macron opened the summit with a dinner at the base of a clifftop lighthouse overlooking Biarritz, where a menu of piperade, a Basque vegetable specialty, tuna and French cheeses awaited the leaders.
Adding to the unpredictable dynamic between the G7 leaders are the new realities facing Brexit-bound Britain: dwindling influence in Europe and growing dependency on the United States.
New Prime Minister Boris Johnson will want to strike a balance between not alienating Britain’s European allies and not irritating Trump and possibly jeopardizing future trade ties. Johnson and Trump will hold bilateral talks on Sunday morning.
Johnson and Tusk sparred before the summit over who would be to blame if Britain leaves the EU on Oct. 31 without a withdrawal agreement.
Tusk told reporters he was open to ideas from Johnson on how to avoid a no-deal Brexit when the two men meet.
“I still hope that PM Johnson will not like to go down in history as Mr.No Deal,” said Tusk, who as council president leads the political direction of the 28-nation European Union.
Johnson, who has said since he took office last month that he will take Britain out of the bloc on Oct. 31 regardless of whether a deal can be reached, later retorted that it would be Tusk himself who would carry the mantle if Britain could not secure a new withdrawal agreement.
“I would say to our friends in the EU if they don’t want a no-deal Brexit then we’ve got to get rid of the backstop from the treaty,” Johnson told reporters, referring to the Irish border protocol that would keep the border between Northern Ireland and EU member Ireland open after Brexit.
“If Donald Tusk doesn’t want to go down as Mr.No Deal then I hope that point will be borne in mind by him, too,” Johnson said on his flight to France.
Johnson is trying to persuade EU leaders to drop the backstop from a withdrawal agreement that was negotiated by his predecessor but rejected three times by the British Parliament as the United Kingdom struggles to fulfill a 2016 referendum vote to leave the bloc.

‘Not the way to proceed’
Despite the Brexit tensions, diplomats played down the likelihood of Trump and Johnson joining hands against the rest, citing Britain’s foreign policy alignment with Europe on issues from Iran and trade to climate change.
“There won’t be a G5+2,” one senior G7 diplomat said.
Indeed, Johnson said he would tell Trump to pull back from a trade war that is already destabilising economic growth around the world.
“This is not the way to proceed,” he said. “Apart from everything else, those who support the tariffs are at risk of incurring the blame for the downturn in the global economy, irrespective of whether or not that is true.”
Anti-summit protests have become common, and on Saturday thousands of anti-globalization activists, Basque separatists and “yellow vest” protesters marched peacefully across France’s border with Spain to demand action from the leaders.
“It’s more money for the rich and nothing for the poor,” said Alain Missana, an electrician wearing a yellow vest — symbol of anti-government protests that have rattled France for months.
EU leaders piled pressure on Friday on Brazilian President Jair Bolsonaro over fires raging in the Amazon rainforest.
Even so, Britain and Germany were at odds with Macron’s decision to pressure Brazil by blocking a trade deal between the EU and the Mercosur group of Brazil, Argentina, Uruguay and Paraguay.
A spokesman for German Chancellor Angela Merkel said not concluding the trade deal was “not the appropriate answer to what is happening in Brazil now.”
The UK’s Johnson appeared to disagree with Macron on how to respond. “There are all sorts of people who will take any excuse at all to interfere with trade and to frustrate trade deals and I don’t want to see that,” he said.