Economic Storm Batters Argentina's Breadbasket

"The fall in prices has been huge, 30 to 35 percent," says farmer Héctor Farroni, left, shown with agronomist Walter Guillaunmet. "The months ahead will not be easy."
"The fall in prices has been huge, 30 to 35 percent," says farmer Héctor Farroni, left, shown with agronomist Walter Guillaunmet. "The months ahead will not be easy." (By Silvina Frydlewsky For The Washington Post)
By Juan Forero
Washington Post Foreign Service
Monday, December 15, 2008

ALFONZO, Argentina -- When Héctor Farroni married a few years back, he took his new bride for a swing through Iowa. The silos and windmills, the spider-like combines, the wide, flat fields all reminded him of this region of eastern Argentina, part of a fertile farm belt that has propelled the country's economy since the 19th century.

The two regions have seemingly infinite potential and serve as breadbaskets to the world. But the similarities end there. While subsidies and low-interest loans sustain American farming, Argentina's government raises export taxes and calls the country's farmers greedy traitors out to topple the state. Now Argentina's heartland is being lashed by an economic crisis that has come in like the winter storms that blow off the Andes and across the pampa.

The crisis, which began in American financial institutions and has hobbled economies worldwide, is slowing demand for Argentine wheat, corn and soybeans -- and that is hitting this country's export-dependent economy especially hard. A report issued last week by New York-based DBRS, a credit rating agency that specializes in Argentina, predicts the economy will contract by more than 1 percent next year -- a sharp downturn for a country accustomed to posting annual growth rates approaching 9 percent.

"The fall in prices has been huge, 30 to 35 percent," said Farroni, 43. "The best thing we have going for us is hope. The months ahead will not be easy, they will be very hard."

In recent years, spurred by technological advances and policies favorable to farmers, Latin America has become one of the world's main centers of agricultural production, its fast-growing exports helping to feed China and India. The growth has been particularly pronounced in the Southern Cone countries of Argentina, Brazil, Uruguay and Paraguay, where soy is the cash crop but producers churn out a diverse yield that includes orange juice and beef.

Here, the farm sector that helped put Argentina among the world's richest countries a century ago rescued it from economic collapse in 2001. Over the past six years, commodity prices increased 343 percent. Grain production in the 2006-2007 growing season was 23 percent higher than the previous season.

The good times have been apparent here in Alfonzo, population 1,100, located northwest of Buenos Aires. Alfonzo's producers put all available land to work. Warehouses and silos were quickly filled, and Norberto Forti's small farm-machinery factory ran nonstop.

The prosperity could also be seen at Alfonzo's Argentine Club, this country's answer to the VFW post.

Celebrations became bigger and more elaborate, and workers were hired to expand the club's facilities, said Walter Martinez, a manager. Martinez proudly showed off a 20-foot-long grill, a necessity for the big barbecues that embody the Argentine soul, and the dance hall, frequently packed for weddings and graduations.

But he acknowledged that good times can be fleeting on the pampa. Looking pensive, he explained the link between the boom-bust cycle of farming and the cycle of rains that sweep across the plains. "It rains, the club fills with people," he said. "Doesn't rain, the spirit in the club falls."

In recent months, it has rained sporadically on the pampa, wilting crops and turning fields as hard as concrete.

In fact, after years of bumper crops, 2008 has proved tough for farmers -- and not just because of bad weather or the global financial crisis.

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