Archive - Sep 4, 2008
Battling the Food Crisis: Brazil's and Argentina's Opposite Approaches
Typically, when global food prices soar, farmers gain and consumers lose. Two South American countries are taking very different approaches to the recent food price hikes. Brazil is pushing its farmers to win more, while South American neighbor Argentina is trying to soften the financial blow to its consumers.
Brazil President Luiz Inacio Lula da Silva is encouraging local farmers to produce more for the global market by increasing government farm credits, a type of indirect subsidy. His administration has also reduced interest rates for farmers to finance new farm machinery and equipment.
Meanwhile, Argentine President Cristina Fernández de Kirchner is increasing export taxes to provide incentives to local farmers to sell their products at home rather than abroad.
At a time when food prices are soaring, should farmers have to share their windfall with the rest of the country? And do governments have the right to manipulate food exports to stabilize prices at home?
The Economist argues that although an export tax on food provides short-term relief for consumers, it will also lower domestic incomes. And it's especially dangerous in Argentina, the magazine says. "Few countries have been as badly governed as Argentina," and "over the past 70 years it has often been the farmers and their exports that have rescued the economy only to see populist governments in Buenos Aires plunder the Pampas to placate their urban voters."
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