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La Niña

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Crops in ArgentinaThere is recent indication that weather patterns stemming from “la niña” will be affecting negatively many argentine crops, namely soybeans and corn. Drought may extend to vast areas of the country and very likely estimated records crops for 2010/2011 at 100 million tons will not be achieved. Lack of rain has made farmers delay sowing numerous crops, in particular the ones mentioned earlier as dryness is affecting mostly the center region of the country. Nevertheless, the effects will not be as severe as those of 2008/2009 crop where output was 33% less than what was estimated at the time.

It is also estimated that most of Cuyo, the southern part of Cordoba and the west of Buenos Aires province will not be receiving rain for some time, as opposed to the NOA region, southeast of Buenos Aires and Chaco as well as north mesopotamia. These weather patterns are expected to stay in place till March and while yield would be reduced, farmers and agents might find compensation in the already higher grains prices which are in turn pricing potential argentine bad crops.

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Corruption in Argentina

A few weeks ago, one of the most watched political TV shows had as a guest Jorge Molina -a former director of Aerolineas Argentinas- as part of a segment on corruption in Argentina. Specifically, the segment was devoted to report a possible complex, widespread and sophisticated network of systemic corruption at a high level that has been operating methodically resembling the works of a mafia organization of sorts. During the interview by host Mariano Grondona, the interviewee stated that sometime around September 2007 right before elections, he was visited by Manuel Vázquez -a former assitant to Secretary of Transportation Ricardo Jaime- who requested “aid” for u$d 1.5 millions for the electoral campaign. Molina then described how he instead offered to contribute what was legally permitted by the “ley de partidos politicos”, a sum considerably smaller.

Succintly, Molina made clear that he was not only coerced into funding the official political campaign at the time but also threatened with roadblocks on his actions as manager of the company if he didn’t cooperate by making it easy for Aerolineas to engage in certain transactions of very large amounts, in which pressumably Vázquez et al. would have had a bite. Interestingly, right after Aerolineas Argentinas was nationalized, the company finalized the purchase of 20 embraer planes from Brazil. The same transaction Molina refused to greenlight, adding that prices set for buying the planes looked stretched in many ways.

Ever since the death of Nestor Kirchner many political figures with ties to the administration have been voicing the need to “profundizar el modelo”. That is, to complete the structural changes initiated by Nestor Kirchner… whatever that means. In reality, digging deeper is hard to find anyone that can precisely explain what is or even how to “further Kirchner’s vision for Argentina”. It is possible that the common person in the street would view this change as one where unions acquire even more power and a bigger piece of the cake just as Moyano has been declaring recently that it is time for argentines to have a “worker” in the Pink House. For yet another group of perhaps more sophisticated citizens, this furthering may entail even more widespread redistribution of income dangerously depleting any wealth left. But for the more savvy bunch, it could just be that what all this really means is pursuing a method of governing where the figure of the government is used to access and acquire power over both private (nationalizing) and public resources with the ultimate goal of manipulating existing structures to facilitate the channeling of funds to those in charge.

Molina’s tale seems to point in this direction as much as many of the recent emails that have been made public through the investigation of the Jaime/Vazquez affair. It may be that a leftist and radical government may find it easier to enrich its own comrades by the use of their special powers. Something that can be vastly more difficult to accomplish if free market forces that make competition and efficiency mandatory where the order of the day. Unfortunately, the average criollo will hardly be able to connect the dots when not even 5 judges working on these and other cases of corruption in official agencies may be able to bring any light or prove any wrongdoing.

Here goes a hope and a wish for Argentina’s bright future… and a new rising model.

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In Argentina, pigs fly

Here is a quickie for those tracking food prices in Argentina. Granted. There are probably vast differences in prices when shopping in select areas of the city compared to faraway places in the province. It is also very likely prices are heavily discounted when shopping in bundles, like in Macro stores or similar wholesale outfits. But this graphic can provide a reliable floor of what prices are for red meat in Argentina, being December even more expensive for staples such as ribeyes, new york strips, asado, flap meat, filet mignon, short ribs, skirt and other cuts. Find a currency converter here.

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Grains: getting closer to opening markets

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Ever since 2006, markets for wheat and corn in Argentina fell under the control of the government just like many other areas where the administration sought to expand power and control. This time, it was Guillermo Moreno -the “Secretario de Comercio Interior”- who devised the strategy to restrict exports so as to keep a lid on domestic food prices. Intervention is always bad, but for Argentina it is even worse when it comes to agricultural commodities given the weight they carry in relation to GDP figures.

As such, Argentina has been missing the train of international skyrocketing prices that would have greatly benefitted the sector. More recently, however, there has been talk of a partial opening of exports via the establishment of quotas. In a maneuver that can be seen as Julián Domínguez – the Minister of agriculture- gaining more influence within the administration while Moreno loses ground, Domínguez announced the possible establishment of export quotas in the amount of  18,5 million tons for wheat and 5,5  million tons for corn.

The news though, wasn’t received warmly. Some insiders to the farm industry instead of acknowledging this as progress have expressed their distrust to government measures that might keep affecting prices paid negatively as quotas would not nurture the needed competition that free markets offer and farmers can take advantage of. Still, there is a sense that with Domínguez there could be more dialogue than there ever was with Moreno.

And that can only be a good thing!

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Icy news

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Like a bucket of cold water, news of ice cream parlors increasing their prices 15% for the summer season was received with equally cold feelings. Just as it is happening with other foods, ice cream cannot escape the inflationary wrath. Bigger chains stated that prices won’t change till the season is over so ice cream lovers are looking for roughly the same prices for their favorite flavors up until March of next year. Just to put things into perspective the price for a 2 pounder (1 kilogram) may range from 23 pesos/kg (u$d 6) to 70 pesos/kg (u$d 17-18) in the case of premiums.

Manufacturers think they can get away with the increases given that they are well below official inflation figures of about 25%/year. As it usually happens, they blame their own cost chain to have pushed prices up (raw materials, etc.) and thus, increases are only being transfered to the final consumer.

With this latest increase, prices have gotten to where they were before the collapse of the currency in 2002. At the time, 1 kg of ice cream was approximately u$d 16/kg.- Just like with many other items, prices have reached the same comparative value they had with the old parity of  $ 1 – u$d 1 pre-collapse. Still, inflation has not been an obstacle for some of the national chains to keep their expansions current. One of the cheapest products in the market belongs to the Grido chain, with 850 branches and headquarters in Cordoba. They are pricing their products at around $23/25 pesos /kg. Grido will be opening another 40 ice cream shops in the city of Buenos Aires and the outskirts during 2011.

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