Food, IMF and falling prices: devaluation?

In these months, a series of data have been confirmed to be considered for the currency settlement in Marchalthough it is passing through wheat And as we mentioned, it is the “cash” of the producer, it is different for the exporter, and let’s not even talk about the strata of each of those roles. In the case of the exporter, he obtains this differential linked to his role as intermediary with other economic centers. A kind of raw materials supplier. For example, the exported grains are used to feed other animals or industrialized for foods such as soybean oil.

In the industrialization of food corn It is used as biofuel, food for humans and animals, and exported as oil and grain; the main countries (Brazil, the United States and Argentina) which, at the same time, if you add Ukraine, are the four main exporting countries. Argentina closed 2023 with an increase of 10.5% compared to 2022, breaking a record for corn bioethanol production (BCR, Edition 2136). From this a question arises: When did this process begin? It would be a research article, but let’s take some notes from Fidel Castro (March 2007), who warned this in 2003 during his visit to Argentina, but confirmed it with Bush’s announcement in 2007. The United States carried out an industrial revolution in the automotive industry.

Today the competition It is not just the space race, but the robotics and automotive industry; the autonomous car, as there are also tractors driven like drones. However, while the world was heading towards the 2008 crisis, on March 26, 2007, President Bush praised the benefits of cars that run on ethanol and biodiesel, during a meeting with vehicle manufacturers, in which he sought to give impetus to his alternative fuel plans, for which he met with the chairman and CEO of General Motors Corp, Rich Wagoner; Ford Motor Co. CEO Alan Mulally and Daimler Chrysler AG Chrysler Group CEO Tom LaSorda.

Drawing up a 10-year plan to reduce gasoline consumption by 20% would be by 2017. To reach that 20% reduction, 320 million tons of corn must be produced. The United States uses 136 million tons for the production of bioethanol (2023) with a production close to 350 million tons. For this campaign, it is projected to produce almost 400 million tons, then we must look at the internal and external market ratio.

Therefore, today the world, mainly in the central economy, evolves in a distribution of food between demand for human consumption, for animals (cow, pig, chicken) that are then consumed or exported, and producing fuel for the domestic market and external. This has led to tensions in domestic prices in peripheral economies. Brazil and Argentina, to different amounts, produce corn. What will Lula and Milei do in this context?

Following the economic data of commodity prices down, productions at least above the averages, the problem is not in “q” (quantity) but in “p” (price), as can be seen (devaluation thread) the prices are, compared to 2022, almost 100 u$ s/tn down, during 2023 and continues without rebounding in 2024. Late rains, prolonged droughts suggest that although we have a record “q” or at least at historical levels, the “p” would not be influenced, adding variables to the context , for two issues: the FED interest rate and the export supply in quantity from other countries, including: the United States, Russia, Brazil, the European Union, China, Ukraine and Australia. Greater supply therefore lower prices, and we must also consider the grain stock. This whole combo today marks less foreign currency income (pxq) for Argentina. How will the government of Milei and Toto Caputo solve this?

There are two pending internal fronts: the impact of the increase in diesel on the harvest that has to be lifted and taken to the marketing, industrialization and export centers; and the uncertainty in biofuels that does not have a law and generates more uncertainty. Both factors could affect the agri-food products that workers consume. Is it possible to go through March, April, May and June stably in this framework of uncertainty and prices that do not accompany them? No, that is why the income projections went from 41,000 to 22,600 million dollars (soybeans and corn. But one measure caught attention, this week, in the analysis and that is that they eliminated a restriction to buy MEP from those who operated dollar Soybeans ( PIE) (a measure that served to advance the harvest to a differential dollar – a sectoral devaluation – during 2022 and 2023), which in the last section of the measure was no longer only for soybeans. Equal access is for agricultural firms or legal firms, that is, agricultural and exporting companies, which will be able to protect themselves from inflation and a possible devaluation. As Hecker and Montagu propose, “it is worth adding one more factor that affects and can be decisive in the Government’s economic strategy: prices internationals have been playing tricks.”

All this suggests that it can there is the possibility of devaluing Will you announce it? Because he knows that it would be adjusting not only the salary but a greater drop in consumption and therefore affecting companies tied to the consumption of workers (SMEs, cooperatives) that carry out their “pxq” based on the expansion of the salary, after the 120% devaluation that generated more hunger. All these points developed have nothing to do with delay or lag, but directly with the renewed plan with the IMF. We say this because the international context is already complex for the social situation of Argentina in the face of a possible devaluation but the IMF, in addition, if we take the renewed agreement, has as objectives: an interest rate above inflation (interest rate 110% inflation in January 250%) Are you complying with the Milei agreement? exchange rate corrections (devaluation) and fiscal adjustment (science and technology-tariff-social) if we take into account the renewed agreement.

The 120% devaluation was to meet an objective of the agreement with the IMF and receive the disbursement. Added to this was the implementation of the adjustment in the budget, which fell on retirees and other areas of health (dengue pandemic) and the scientific and technological system (generating brain drain and delaying research for the development of the Nation), are frozen or without officials to sign the transfers, since, in addition, it was made by President Milei’s decision to use the 2023 budget after 211% inflation in that year.

So, What the IMF requests is being fulfilled but now it asks the Executive that these measures have “political support” given the prevailing social gravity Will President Milei be able to generate the political support that the IMF asks of him for the measures adopted? For now the league of governors accompanies Chubut in its claim.

Director of IDEPI-UNPAZ, UBA Economist