Through The Static

August 27, 2008

As Food Prices Soar, Brazil and Argentina React in Opposite Ways

Filed under: Economics,Food,World News — disciplepete @ 1:00 pm

NYT:

SÃO PAULO, Brazil — Luciano Alves planted beans, corn and grain on about 7,500 acres of his farm in southern Brazil last year. This year, he is planting 8,600 acres. And he credits Brazil’s president, Luiz Inácio Lula da Silva, with the increase.

“The government is helping us finance the purchase of new machinery,” said Mr. Alves. “They reduced the interest rates we pay and have given us more time to pay off the loans. It’s vital.”

Rising food prices mean many farmers around the world are reaping record profits. And South America’s agricultural powerhouses, Brazil and Argentina, are responding to the farming windfall in exactly opposite ways.

Mr. da Silva’s government recently announced record farm credits, in an effort to get Brazil’s farmers to produce more while the price of their exports are high on world markets, a move that should improve Brazil’s economy. But Argentina, Brazil’s economic and political archrival, decided to share the agricultural windfall at home.

Worried about the wave of inflation rippling around the world, the government of President Cristina Fernández de Kirchner increased export taxes on some crops, a move meant to keep down domestic food prices by encouraging farmers flush from global profits to sell more at home.

“In our country the government is trying to get money to subsidize other sectors of the economy,” said Eduardo Cucagna, president of FN Semillas, an Argentina seed company, objecting to the policy. “I think Brazil is doing the opposite, adapting to what the world is offering now. They’re doing it right.”

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