Table of Contents

  • The Review of Agricultural Policies in Argentina is one in a series of reviews on national agricultural policies undertaken by the OECD Committee for Agriculture (CoAg). It has been prepared by the OECD Trade and Agriculture Directorate in collaboration with the Secretariat of Agroindustry of the Government of Argentina. The Review examines key trends and policy issues that have shaped the development of Argentina’s agricultural sector over the last two decades and presents a quantitative evaluation of support provided through Argentina’s domestic and trade policies. The Review classifies and measures the support provided to agriculture using the methodology that the OECD employs to monitor agricultural policies in all OECD countries and a growing number of non-member economies, including Brazil, the People’s Republic of China, Colombia, Costa Rica, India, Indonesia, Kazakhstan, the Philippines, the Russian Federation, South Africa, Ukraine, and Viet Nam. The Review is the first step in the inclusion of Argentina in the annual OECD Agricultural Policy Monitoring and Evaluation report. The Review also features discussion of issues in the Argentine agriculture sector under the main areas of work of the CoAg, such as innovation, productivity, sustainability, risk management and value chains.

  • The Argentinian agro-food sector has grown and innovated remarkably in the last three decades, driven by technological change and, over much of the period, by high international agricultural prices. An upper‑middle income country, well-endowed with natural resources and human capital, Argentina has a history of macroeconomic volatility and policy instability that has contributed to its long term overall poor economic performance. Despite challenges, agriculture is the country’s main exporting sector and an exception in terms of performance. Agriculture in the extended Pampas region has experienced a major structural transformation involving crops, manly cereals and soybeans, productivity growth and new on‑farm practices, technologies, institutions and contractual arrangements. Land use and production have significantly changed in favour of soybeans, and exports have shifted towards China and other Asian economies. Meanwhile, other products in other regions have under-performed: agricultural goods produced outside the Pampas region such as vegetables, fruits, cotton and tobacco have experienced lower productivity growth rates.

  • Argentina’s agriculture sector has gone through a notable innovation process in the last two decades. This transformation was mainly led by the private sector in a context of policies that significantly tax producers but support large public investments on general services such as research, extension and animal and plant health. The Review of Agricultural Policies in Argentina is a comprehensive analysis of the agricultural sector and its transformation, and of the role of public policies in facilitating innovation, risk management and the development of value chains, while contributing to resource sustainability. Based on the analysis in other chapters, this chapter assesses the main challenges for the sector and provides policy recommendations.

  • Argentina is an upper-middle income country well-endowed with natural resources and human capital. Its history of macroeconomic instability and volatility in policy orientations from open markets to import substitution has led to overall poor long-term economic performance. The main exception has been the agricultural sector which, despite policy impediments, has innovated and grown over the last two decades. Driven by higher international agricultural prices, Argentinian agriculture – in particular, in the extended Pampas region – has experienced a major structural transformation in production and productivity, in on-farm practices and technologies, and in its institutions and contractual arrangements. This has been reflected in large changes in the use of land and the portfolio of commodities in favour of soybean, and in the composition and destination of exports towards Asia. However, other agricultural production lags behind – notably that in regional economies (outside of the Pampas), including tobacco, cotton and fruits and vegetables.

  • Agricultural policies in Argentina have suffered the same volatility as other policies, especially macroeconomic and trade policies. The open economy approach of the 1990s was followed by a period of economic isolation with higher tariffs and export taxes over 2001-15. The current Government has renewed the open economy approach since 2015. The Ministry of Agriculture was only separated from the Ministry of Economy in 2009, while a broader focus on the whole value chain was introduced in 2015 and reflected in the new name of Ministry of Agroindustry, which is part of the Ministry of Production and Labour since September 2018. Several decentralised institutions with responsibility for implementing agricultural policies and services have a long tradition of professionalism; these include the research and extension institute, INTA, and the animal and plant health service, SENASA. There are very few input or output payments to producers in Argentina, with the exception of programmes under the Special Tobacco Fund (FET), preferential credit mainly to small producers through FINAGRO and some infrastructure programmes such as PROSAP.

  • Argentina’s policies have burdened the agro-food exporting sector for most of the last two decades. Producer support was estimated to have a negative value of -14% in 2015-17, showing the impact of these policies on farmers’ receipts. The %PSE was as low as -39% in 2008-10. This negative value is an outlier compared with most other countries covered by OECD monitoring and evaluation. The current administration eliminated all export taxes with the exception of those on soybean in 2016, and this has been reflected in the reduction in the absolute value of the negative PSE. Given that soybeans represent a big share of the value of production in Argentina, the PSE is likely to remain negative if the export taxes on soybean remain. The new temporary tax on all exports introduced in September 2018 is not yet reflected in the estimates of support. Direct payments to farmers are marginal. General services on Knowledge and Innovation and Inspection are significant. However, the Total Support Estimate (TSE) remains negative.

  • Export restrictions and taxes on soybean, sunflower, wheat, corn, beef, milk and poultry have depressed producer prices for most of the last two decades in Argentina. Export taxes were typically lower for processed products, while quantitative restrictions and export licences have particularly affected wheat and beef. Export restrictions have proved not to be an effective and sustainable instrument for reducing food inflation, although they did generate fiscal revenue, notably in years of high food prices on world markets. This type of measures may contribute to world market price volatility. Federal revenue from export taxes is not shared with the provincial governments and represented as much as 13% of all tax revenues and 3% of GDP in 2008, a year of particularly high world food prices. Since the end of 2015, policy changes to reduce or eliminate taxes on agricultural products moved in the right direction of reducing distortions. The more recent decision to tax all exports in response to the economic turmoil of August-September 2018 should help macroeconomic stability and set the stage for more sustainable fiscal revenue over the longer term. The new export tax does not discriminate a specific sector like agriculture and has a sunset clause by the end of 2020. It should be part of an on-going process to improve the tax system.

  • During the last three decades, Argentina’s agriculture went through a process of notable production and structural change and innovation. Outside the Pampas region, agriculture showed little dynamism during the last decades, but within it a remarkable increase in arable land area and productivity was associated with the widespread adoption of new technologies such as no‑tillage and biological improvements, and the expansion of soybean production. With new roles and new actors such as large service contractors, sowing pools and farmers’ innovation associations, the private sector has led the innovation process responding to economic incentives. The role of policy has been important in creating basic and applied knowledge and facilitating its diffusion and adoption, in particular through the National Institute of Agricultural Technology (INTA). Argentina benefited from access to genetic innovations in advantageous conditions that are unlikely to recur. However, the Agricultural Innovation System needs to improve its capacity to respond to new environments and growing sustainability challenges, focusing also on “regional economies” (agricultural production chains outside of the Pampas region), improving the enforcement of seed intellectual property rights, and enhancing INTA capacities to respond to new demands to create and transfer knowledge.

  • Argentina’s agriculture sector has transformed at an accelerated pace in recent years with new technologies and the expansion of the agricultural frontier. This has opened new opportunities for the sector but has increased environmental pressures. The trends in the agri-environmental indicators reveal that most of these pressures are still lower than in OECD countries. However, deforestation rates in Argentina are high and the use of pesticides per area of cropland has risen at rates well above the OECD average. In the context of reducing export taxes on the main exporting commodities, it is important to strengthen the Native Forest Law and good environmental practices on the use of pesticides and rotation, potentially incorporating targeted instruments to enhance the responsibility of producers in reducing negative agri‑environmental externalities.

  • Argentina has few policies oriented to risk management, mainly consisting of support derived from the Agricultural Emergencies Law and the plant and animal health services provided by SENASA. Several provinces have recently provided varying degrees of support to insurance. Disaster risk management policies are focused on ex-post assistance and could gain from refocusing on ex-ante prevention and preparedness. The significant policy and macroeconomic risk in Argentina and the underdevelopment of the financial sector creates a difficult environment for agricultural risk management. However, the focus of government policies on catastrophic risk has facilitated a remarkable development of technological innovations and market and contract strategies that have contributed to the resilience of the sector.

  • Structural duality is an important characteristic of Argentina’s agriculture and is reflected in the differences between the Pampas region and those that surround it. In the Pampas region, most of the grains, oilseeds and beef is produced by large-scale, export-oriented producers. This agriculture is highly productive, with well-developed value chains linked to international markets. Oher regions (“the regional economies”) produce fruits and vegetables and agro-industrial products like wine, tobacco, cotton or sugar. Some of these products, like apples, pears and wine, are exported in competitive world markets but have an internal duality. In the apple-and-pear value chain farms which are fully integrated into global markets (usually large and medium size) coexist with less integrated farms (mostly small-scale). These small-scale farms have several difficulties, particular the low use of technology, deficient pest control, old orchards, and in general, very limited investments at farm level. Meanwhile, the viticulture value chain has had significant investments since 1990s by both foreign and local investors attracted by deregulation and relatively low‑price, good-quality land. Nonetheless, it still faces several constraints, particularly related to limited research and development, training and extension services.