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OPINION AND ANALYSIS | 04-04-2023 11:08

Argentina: a country which always depends on the rain

While rainfall at times this year has eased the panorama, losses of US$12 billion to US$15 billion are forecast for Argentina's export earnings due to drought. An analysis of the last 70 years indicates that climatic phenomena like La Niña can strongly affect Argentina’s economy and damage sitting governments, as poor harvests did for Fernando de la Rúa (2000-2001), Cristina Fernández de Kirchner (2008-2009) and Mauricio Macri (2017-2018). What could happen in the October elections?

The weather determines economic activity in Argentina. Drought years, for example, have a strong impact on a reduced inflow of hard currency for soy, maize and wheat exports, but also on the domestic prices of meat and other foods, on tax revenue and exchange rate fluctuations. Our country continues to be highly dependent on its agriculture. That is why extended droughts with a lack of rainfall frequently have political consequences, especially in electoral years.

For example, the entire presidency of the Unión Cívica Radical leader Fernando de la Rúa — reduced to two years by his resignation in late 2001 — was accompanied by the climatic phenomenon known as La Niña, implying a lack of rainfall and drought, a farmers’ worst nightmare for farmers because they cannot sow nor their crops grow, among other catastrophes. The economic and political crisis of 1989, ending in the early resignation of another Radical, Raúl Alfonsín, replaced in the Casa Rosada by Peronist leader Carlos Menem, was preceded by La Niña. More recently, the 2018 drought changed the course of the Mauricio Macri government.

 

Echoes of the past

What will happen now that we are undergoing a third straight year of drought?

The rainfall of January and February brought relief in some zones but it did not reach all the country or all the crops. The most recent calculations from the Rosario Stock Exchange forecast a plunge in hard currency earnings of US$12 billion to US$15 billion due to less exports.

Argentina’s harvest will thus resemble that of 2017-2018 when the economic slump causing Macri to lose the 2019 elections began. The country also suffered a similar fall in production in 2008-20009 when then-president Cristina Fernández de Kirchner lost the midterm elections.

In order to understand the interdependence between drought and politics, it is worth considering that the last 70 years since the 1952-1953 harvest have resulted in 26 years of El Niño (heavier rainfall than normal but without major consequences), 24 years of drought from La Niña, and 20 neutral years with normal rainfall.

In very general terms, ‘La Niña’ is a chilling of Central Pacific waters which generates a circulation of the atmosphere with a net negative effect on the distribution of humidity over our country. 

The entry of humidity into Central and Eastern Argentina has thus been hit by a regional drought affecting the southeast of the South American hemisphere (including zones of Paraguay, Uruguay and southeastern Brazil).

Furthermore, a drier atmosphere is also more vulnerable to variations in temperature which compound the heat waves in summer and increase the frequency of frost in both early and late winter. Combined with drought, they are transformed into lethal weapons against agricultural production.

In counterpoint, ‘El Niño’ is a heating of the Central Pacific which generates a circulation and distribution of humidity producing the inverse situation to La Niña, boosting the levels of rainfall over the productive farming regions of our country.

It is interesting to observe that the severest and most continuous droughts have had a very negative fallout for the economy as the prelude for the crises of the years 1976, 1989, 2001, 2008 and 2018. We are currently undergoing three straight years of La Niña.

In those years the droughts brought political changes and economic crises which left the country and society very deeply wounded.

Looking from 2011 to the present, we may observe in those 13 years seven occurrences of La Niña, three neutral years and three cases of El Niño.

 

Back to growth

It might be recalled that Argentina has not grown since 2011. Given that in general it has taken us more than a year to come out of drought, we may project that we are doomed not to grow in 2023. Furthermore, a neutral year or with heavier rainfall for the next harvest will not assure us immediate growth, since first the land will need to recover the lost ground whereupon, if all goes well, we will only be able to return to growth with the 2024-25 harvest.

If we look at the evolution from 1970 to the present, we can see that with the return to democracy, Alfonsín was in general blessed by the climate, although without the right economic management for the problems of those times. Menem felt the impact of neutral years and drought but also had years of economic growth which coincided with better weather for farmers.

The prelude to the major crisis of 2001 was plagued with drought years and that helped to trigger one of the most important political and economic crises in Argentina’s history. Fernando De La Rúa had to leave office in midterm without ever having experienced the right weather.

If we look back in time, in the two decades between 1950 and 1970 we only had five cases of La Niña or very favourable weather although the numbers indicated that the country did not know how to make good use of that backdrop.

Of the 25 cases of La Niña, seven have come in the last 13 years with the biggest impact of the drought being noted in 2018 under the Macri presidency and the three straight years of drought which we are now undergoing.

Evidently there is a correlation between the weather, the economy and politics. It remains to be seen if it will be repeated in 2023.

One additional problem is that the exit from this crisis will be very slow, as indicated by the historical series. We may calculate that it will take at least two years, always provided that the drought does not continue.

 

Conclusion

Argentina depends on agricultural exports which assure a flow of dollars to permit the necessary imports, significant fiscal revenues via export duties and other taxes and economic growth in general. This correlation between the climate and gross domestic product evolution leave it clear that governments have more chances of being successful with fair weather while the perspectives are otherwise if foul, as in the case of De la Rúa.

On the other hand, drought years leave very fragile financial and economic markets with recovery only possible in two harvests — there is no immediate exit from crises.

If, as we have seen, the climate is so important not only for agriculture but also for the entire economy, governments should be attending the demand of farmers to be insured against the weather, which not only would serve to protect agricultural production from the vagaries of an always unpredictable climate but would also be an umbrella for all the economy and even governments which depend so much on the rural locomotive.


* Salvador Di Stéfano is the head of Salvador Di Stéfano y Asociados consultancy firm.
** Leonardo De Benedictis is a UBA (University of Buenos Aires) graduate in atmospheric sciences.

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by Salvador Di Stéfano * & Leonardo De Benedictis **

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