Producers of the MERCOSUR and their committment to food production and trade

Written by Raul Roccatagliata, Head, International Affairs, Sociedad Rural Argentina (SRA)

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MERCOSUR producers (Argentina,Brazil, Uruguay, Paraguay, Chile and Bolivia) have a strong commitment in producing healthy food and nutritious for a population that increasingly demands more, higher quality protein, low sustainable production systems.
We stress the importance of the region in the production and trade of food:
• We produce 10.8% of world corn (106.8 million tons);
• 32% of soybean oil (13.8 million liters) and
• 7.8% of the total cotton (9.5 million tons).
• We are the largest producer of orange juice (50% of the world);
•One of the leading producers of coffee (36%), vegetable coal (33%);
sugar cane (27%) and beef (26%).
(SOURCE: USDA 2014)

Regarding exports, the Mercosur is a leader in several relevant products;
such is the case:
• Soybean, with 21% of total exports;
• Soybean oil with 68%;
• Soy flour with 72%;
• Corn with more than 30%,
• Bovine meat with 30% and 7% for rice.
(SOURCE: USDA 2014)

As producers we are challenged to contribute in consolidating economic and
social development of our region, to the extent that the design of public policies aims to allowing producers to promote their full productive potential.
We understand that increasing production and trade is the best way to ensure food availability. This is a challenge that we face as producers and are willing to pursue. In this context, the objective of the economic policies implemented by governments, should be strongly oriented to promote the development of investment in the rural sector, in a context of competition from further deregulation and intelligent openness of the economy, ensuring the free functioning of markets.
Currently, producers face a medium-term scenario of great uncertainty, with economic variables concerning both growth of world economies and trade, far below the levels that existed prior to the crisis of 2008/2009.

In addition, the appreciation of the US dollar and the relative price realignment of currencies from the devaluation being done by China, added more uncertainty to the global food trade.
This could manifest itself in a considerable reduction in the volume of exports, which are mostly destination in China Republic and the international prices of food commodities impact in the medium term, a negative balance of payments of the exporting countries.
The commodities market is presented with high volatility caused,among other reasons, by the uncertainty created on the market, public policies that encourage individual States to safeguard in the short term domestic markets. In this regard, we believe that international efforts to prevent the proper flow of trade protectionism are the main cause of market volatility.
We think it is important to emphasize that an increase or decline in the price of raw materials is not necessarily reflected in a rise or fall, similar and widespread food end products.
The fall in commodity prices is not always reflected in the prices paid by consumers.
In my country, Argentina, despite the fall in commodity prices, we know that producers are price takers, food prices did not fall, on the contrary, rose shaped and continue to rise slowly and permanent.
In our country, when a consumer buys a kilo of meat, 300 grams are taxes and duties levied on the entire chain of production and marketing.
Similar situation is observed in other commodities such as bread, milk and rice, among others.
Argentina’s experience in the implementation of policy intervention and market regulation (such as barriers to exports and imports) have been negative; generate a scenario that threatens the investment, resulting in a stagnation of production and loss of international markets that will be difficult to recover.

Just an example, a few years ago in 2005, we were the 3rd exporter of beef in the world and today fell to 14 th place.
In a market that grew 42.85% in volume between 2005 to 2014, Argentina fell 54.98%. Its important participation fell from 7% to insignificant 2.2% in 2014.
If we analyze what happened in recent years, according to the World Trade Organization (WTO Trade Policy Reviews)between 2006 and 2014, a total of 97 nations, 37 countries orchestrated, in at least one agricultural product, some kind of tax the temporary export. With the particularity that most countries that applied, developing or emerging countries.
To our knowledge, this type of investment policies threatens the stability of the markets, the processes of innovation and technological incorporation.
Because every time you subtract income to producers, is lost productivity and jeopardizes the sustainability and advancement of good agricultural practices.

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CONCLUSIONS

Guidelines Policy, aimed at achieving greater food production and marketing:
1) Democracy, institutions and systems of guarantees.
All government, and society itself, must ensure full respect of the democratic order, respect for the institutions and the fulfillment of individual rights and
guarantees.
2) Macroeconomic Policies.
We must become more competitive,and in this sense, it is necessary to search for macroeconomic equilibrium for the treasurer and social development of our countries. Proper management of state with responsibility for fiscal policy, making an economic, efficient and effective administration, without hampering the action of the private sector.
If governments lead to grief producers,it is an attack against the sustainability and this is of central importance.
3) Public policies aimed at increasing investment and improving productivity in the agricultural sector.
Consider key policy coordination that encourage greater production, aimed at strengthening aspects related to health,safety, biotechnology, infrastructure,research and development, value chain,crop insurance, etc. Allocate more resources aimed at promoting research and development to agricultural growth is the way to achieve improved productivity.
4) Trade is part of the solution and not the problem.
It is fundamental that the various public policies aimed at fostering the development of trade in both domestic markets as regional and international. Thus there will be a competitive framework that will ensure the development and investment in the various food producing countries. It is worrying at this point, many countries foresee the tune to free international trade, implemented with great creativity continued trade barriers that reduce competition in the global market.
5) Development of market information systems.
We emphasize the importance of increasing public access to information on the quality and quantity of food stocks.
Leading the consolidation of a global information system: supply, demand and stock levels, in order to make transparent information with an independent character.
6) Use of political non-contributory cash transfer.
To meet the needs of the indigent population propose the use of instruments of direct cash transfers will boost non-contributory, strengthening social actions in lower income strata.
In the Mercosur region there are over 100 million hectares available for incorporation into production under sustainable ecofriendly practicies. Argentina, in the short term, has the potential to produce food for over 680 million people.
In order to achieve this, we need State policies with long-term vision, to boost investment and innovation processes, enhancing the productive capacity of our producers.

 

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