These soybean and corn production shocks would produce a drop in the Gross Agroindustrial Product (PBA, adding the 6 extensive crop chains) of the order of 6.1% in the case of a moderate drought, and 9% in a severe one, in relative to the baseline scenario. This would mean a decrease of 2,726 and 3,830 million dollars, respectively.
In this context, taking the IMF projection for Argentina’s GDP in 2022 (US$483.77 billion), the moderate scenario would have an impact of -0.6% of GDP, while in the severe scenario the impact would be one fall of 0.8% of the product.
The key fact is that if the positive effect on international prices currently shown by commodities is not considered – yesterday soybeans closed at US$567.78 per ton – and these remain at current levels, the impact of the most severe drought on total PBA could reach US$5,903 million, which would represent a drop of 1.2% of the estimated GDP for 2022.
In the same vein, the economist Claudio Caprarulo of the consulting firm Analytica analyzed in dialogue with Ambit: “It is still not clear what the extent of the drought will be, on the one hand because there is still time to go by and the weather may be a little more favorable. At the same time, the lower production projections are pushing prices up, for example soybeans returned to June values, trading at almost 570 dollars per ton. Consequently, smaller quantities can be partly offset by higher prices. It is one of the most important effects to follow in the coming months. Both for its effect on withholdings and on the income of dollars. If we think about it in terms of the agreement with the IMF, they have an impact on the goal of the fiscal deficit and the accumulation of reserves”.
Another fact to take into account is that in addition to the Gross Product, tax collection would also be affected, fiscal resources would decrease between 769 and 951 million dollars, depending on the scenario of moderate or severe drought. The main drop corresponds to the collection of export duties, but other income taxes, such as national and provincial impositions, would also be affected.
For its part, Lorenzo Sigaut Gravina, from Equilibra explained: “Beyond the direct impact on GDP, what worries me the most is the availability of foreign currency. There are estimates that already anticipate that US$6,000 million of losses due to the drought, of which there are already US$4,000 confirmed from the thick harvest. Agriculture is the main source of genuine foreign exchange for Argentina and if we lose US$6 billion in exports, the question is how are we going to recover it? Perhaps with the agreement closed with the IMF just there they can return some US$6,000 million for interest payments and SDRs, but they are dollars for the capital account that must be returned. The impact is much greater if we also take into account that the drought affects energy generation and we would have to import, which also requires more dollars. The truth is that after a phenomenal year such as 2021 in foreign currency income and this year we are going to have a setback.
Source: Ambito
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