2006 Argentine restriction of beef exports
Encyclopedia
Argentina
is one of the world's largest producers of beef
. It is also the third-largest exporter (after Brazil
and Australia
), and has the world's highest consumption rate (an average of 68 kg per person per year). On 8 March 2006, President
Néstor Kirchner
took the drastic measure of banning all exports of beef for a period of 180 days, in order to stop continuous price rises.
Exports had soared after the collapse of 2001
forced the government to let the national currency
(the peso
) float
and depreciate
. As a result, internal prices of beef, a major staple
of Argentine diet
, rose considerably, and part of the beef production was diverted from the local market to import
ers abroad. Increasing demand
, both local and foreign, also contributed to this scenario. In 2005 Argentina exported 40% more beef with respect to the previous year, for about $
1.4 billion.
In late 2005 and 2006, months of unsuccessful negotiations went on between the national government and the beef producers and traders, which included considerable political and media pressure by the former. Similar negotiations to achieve "price stability agreements" (consensual price controls
) with other sectors of economy had been successful to varying degrees. On 3 February 2006, several meat plant associations announced that they would limit their own exports to 20% less than the amounts recorded in 2005, but this was not done in reality.
Reference beef prices at the Liniers Livestock Market had accumulated a 26% rise only in 2006, until the ban was announced, on top of 29% during 2005. Due to its prevalence in Argentinians' diet, the price of beef has a large influence in the overall inflation
rate, which had already become a concern.
The exports ban included meat cuts that are not usually consumed in the local Argentine market, but did not force exporters to cancel previously arranged contracts with foreign buyers or bilateral country-based agreements, and did not include the Hilton Quota
(28,000 tonne
s of high-quality frozen cuts destined to the European Union
, free of tariff
s). The total amount affected was estimated at 600,000 tonnes.
In addition to the ban, the government raised the exports tax from 5 to 15% for certain processed beef products, equalizing them with those applied to other products.
Immediately after the announcement, the Argentine Rural Society (SRA) released a comunique, stating that exporters would lose 280,000 tonnes in sales, for 585 million USD
, and that many meat processing plants would go bankrupt, thus causing the loss of thousands of jobs. Moreover, the SRA denounced the ban as harmful for Argentina's international image, and as a short-term measure that would not solve the background problem (scarcity of livestock
due to lack of economic incentives).
On 26 May the Ministry of Economy partially lifted the ban, allowing for a quota for June–November equivalent to 40% of the exports of the same period in 2005. This followed a period of falling beef prices in the Liniers Market (though not to the general public) and several acts of protest by livestock farming organizations, including the threat of a nationwide strike
.
On 4 July the restrictions were again softened, by allowing exports for an extra 25% of the amount of 2005. The new quota included expensive beef cuts that have no demand in the internal market (such as rump and loin
) and others that are only destined for corned beef
. A new loosening (to 70% of the 2005 figures) was announced on 28 September.
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
is one of the world's largest producers of beef
Argentine beef
Beef is a key component of traditional Argentine cuisine.-Current situation:Argentina has the world's second highest consumption rate of beef, at 55 kg a year per capita. In 2006, livestock farmers kept between 50 and 55 million head of cattle, mostly in the fertile pastures of the Pampas...
. It is also the third-largest exporter (after Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
and Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
), and has the world's highest consumption rate (an average of 68 kg per person per year). On 8 March 2006, President
President of Argentina
The President of the Argentine Nation , usually known as the President of Argentina, is the head of state of Argentina. Under the national Constitution, the President is also the chief executive of the federal government and Commander-in-Chief of the armed forces.Through Argentine history, the...
Néstor Kirchner
Néstor Kirchner
Néstor Carlos Kirchner was an Argentine politician who served as the 54th President of Argentina from 25 May 2003 until 10 December 2007. Previously, he was Governor of Santa Cruz Province since 10 December 1991. He briefly served as Secretary General of the Union of South American Nations ...
took the drastic measure of banning all exports of beef for a period of 180 days, in order to stop continuous price rises.
Exports had soared after the collapse of 2001
Argentine economic crisis (1999-2002)
The Argentine economic crisis was a financial situation, tied to poilitical unrest, that affected Argentina's economy during the late 1990s and early 2000s...
forced the government to let the national currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
(the peso
Argentine peso
The peso is the currency of Argentina, identified by the symbol $ preceding the amount in the same way as many countries using dollar currencies. It is subdivided into 100 centavos. Its ISO 4217 code is ARS...
) float
Floating exchange rate
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency....
and depreciate
Depreciation (currency)
Currency depreciation is the loss of value of a country's currency with respect to one or more foreign reference currencies, typically in a floating exchange rate system. It is most often used for the unofficial increase of the exchange rate due to market forces, though sometimes it appears...
. As a result, internal prices of beef, a major staple
Staple food
A staple food is one that is eaten regularly and in such quantities that it constitutes a dominant portion of a diet, and that supplies a high proportion of energy and nutrient needs. Most people live on a diet based on one or more staples...
of Argentine diet
Cuisine of Argentina
Argentine cuisine may be described as a cultural blending of indigenous Mediterranean influences with the wide scope of livestock and agricultural products that are abundant in the country...
, rose considerably, and part of the beef production was diverted from the local market to import
Import
The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus...
ers abroad. Increasing demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
, both local and foreign, also contributed to this scenario. In 2005 Argentina exported 40% more beef with respect to the previous year, for about $
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
1.4 billion.
In late 2005 and 2006, months of unsuccessful negotiations went on between the national government and the beef producers and traders, which included considerable political and media pressure by the former. Similar negotiations to achieve "price stability agreements" (consensual price controls
Incomes policy
Incomes policies in economics are economy-wide wage and price controls, most commonly instituted as a response to inflation, and usually below market level.Incomes policies have often been resorted to during wartime...
) with other sectors of economy had been successful to varying degrees. On 3 February 2006, several meat plant associations announced that they would limit their own exports to 20% less than the amounts recorded in 2005, but this was not done in reality.
Reference beef prices at the Liniers Livestock Market had accumulated a 26% rise only in 2006, until the ban was announced, on top of 29% during 2005. Due to its prevalence in Argentinians' diet, the price of beef has a large influence in the overall inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
rate, which had already become a concern.
The exports ban included meat cuts that are not usually consumed in the local Argentine market, but did not force exporters to cancel previously arranged contracts with foreign buyers or bilateral country-based agreements, and did not include the Hilton Quota
Hilton Quota
The Hilton Quota is the informal name of the Tariff Quota regulated by the Commission Regulation No 936/97 of 27 May 1997 for the European Union.-Beef supplies:...
(28,000 tonne
Tonne
The tonne, known as the metric ton in the US , often put pleonastically as "metric tonne" to avoid confusion with ton, is a metric system unit of mass equal to 1000 kilograms. The tonne is not an International System of Units unit, but is accepted for use with the SI...
s of high-quality frozen cuts destined to the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
, free of tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s). The total amount affected was estimated at 600,000 tonnes.
In addition to the ban, the government raised the exports tax from 5 to 15% for certain processed beef products, equalizing them with those applied to other products.
Immediately after the announcement, the Argentine Rural Society (SRA) released a comunique, stating that exporters would lose 280,000 tonnes in sales, for 585 million USD
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
, and that many meat processing plants would go bankrupt, thus causing the loss of thousands of jobs. Moreover, the SRA denounced the ban as harmful for Argentina's international image, and as a short-term measure that would not solve the background problem (scarcity of livestock
Livestock
Livestock refers to one or more domesticated animals raised in an agricultural setting to produce commodities such as food, fiber and labor. The term "livestock" as used in this article does not include poultry or farmed fish; however the inclusion of these, especially poultry, within the meaning...
due to lack of economic incentives).
On 26 May the Ministry of Economy partially lifted the ban, allowing for a quota for June–November equivalent to 40% of the exports of the same period in 2005. This followed a period of falling beef prices in the Liniers Market (though not to the general public) and several acts of protest by livestock farming organizations, including the threat of a nationwide strike
Strike action
Strike action, also called labour strike, on strike, greve , or simply strike, is a work stoppage caused by the mass refusal of employees to work. A strike usually takes place in response to employee grievances. Strikes became important during the industrial revolution, when mass labour became...
.
On 4 July the restrictions were again softened, by allowing exports for an extra 25% of the amount of 2005. The new quota included expensive beef cuts that have no demand in the internal market (such as rump and loin
Beef tenderloin
A beef tenderloin, known as an eye fillet in New Zealand and Australia, filet in France and Germany and fillet in the United Kingdom, is cut from the loin of beef. As with all quadrupeds, the tenderloin refers to the psoas major muscle ventral to the transverse processes of the lumbar vertebrae,...
) and others that are only destined for corned beef
Corned beef
Corned beef is a type of salt-cured beef products present in many beef-eating cultures. The English term is used interchangeably in modernity to refer to three distinct types of cured beef:...
. A new loosening (to 70% of the 2005 figures) was announced on 28 September.