Drought in Argentina, what will happen in 1 year?

[French jurist]

I guess this subject will be heavily debated during the year to come.
You’ve heard about it in the news, if you search online you’ll find articles stating it’s the most severe drought in the past 30/70/100 years.
I have no clue if it’s the worst one in the past 30/70/100 years but three weeks ago I drove across the provincias of San Luis, Cordoba, Santa Fe and the crops were really in poor shape, the soy crops were really short (compared to Buenos Aires where it seems to be better). Of course, regarding soy, it depends when it was seeded but still, there’s no doubt that something important is going on and will start impacting the Argentinean economy around september/october (?).
I wonder what will be the consequences in one year, or more exactly, the magnitude of those consequences. I’m quite pessimistic about it.

(Hoping this won’t turn in the usual CFK bashing btw, she’s not responsible of La Niña weather phenomenon for instance. Still, this will affect the finances of the country… no good)

 

[Napoleon]

The corn crop in the BsAs province (near Chivilcoy at least) will be lucky to turnout a yield of 30% of their typical yield. Tax revenue from the campo just isn't going to be there this year.

 

[robinho9]

no, NK & CFK aren`t responsible for La Niña or the lack of rain. But they are responsible for not having a PLAN B when a drought - which can always happen when you`re working with and relying on nature - is reducing one of their main income sources to a minimum. i mean, the price and demand of soy on the world market just saved their butts over the last years. (the soy bean = el modelo) however, it looks like this party is over.
it`s a shame, really. instead of buliding up a more competitive industry and a strong economic backbone over the last 9 (!!!) years they heavily reduced of one of their most famous "backbones" - their cattle - and just were sowing the seeds of soy...

 

[dennisr]

Think projected grain yields are the crux of the government's import/export dilemma. Soy prices are depressed by about 40% from last year and Argentina's drought only compounds her problem. Argentina desperately needs dollars to import big ticket items: diesel, natural gas, petrol... In four years she has gone from a net exporter of energy to an importer, natural gas reserves are down 60%. Back in September, Argentina tendered offers for LNG, delivery in 2012. The fly in the ointment was, payment delayed for six months. No takers. Hand writing was on the wall in September, cash flow problem.

 

[davonz]

If the drought is really bad, expect prices of meat to increase, as from recollection argentina went from 3rd biggest exporter of meat in 2007 to 10th in 2010, then net importer in 2011 due to farmers swapper from cattle to soya production when the CFK started taxing them 35% on exported meat to keep the prices down in arg.

As for crops, if there has not been enough rain to germinate they might be ok, as when the rains do come it will grow as long as its not to late to be effected by winter, the harvest will be reduced, but at least there is something to harvest - this happens in aus often. However as soon as its up and no rain for a month, or very little, the harvest will be effected badly.

With car exports/production down due to reduced demand and a slow down in brazil - last report i read it was down close to 20%, this could start to make the economy really hurt.

With reduced foreign $ coming into the country, the gov might have to start printing pesos to pay the local bills, which will put pressure on the peso and give inflation more fuel. They will also have to conserve as much US$ as possible to pay for fuel/gas and such like. Argentina is in no position to purchase on credit, or borrow from the world banking system, so this year could turn out to be a tough one.

The only saving grace has been that europe and its problems have been taking all the attention, so no one has really been paying argentina much attention. This might change if greece is finally sorted and the rest of the problem euro zone countries stablise.

 

[va2ba]

Could this be what finally breaks the back of this so called economy?

I haven't heard one good piece of economic news from Argentina in who knows how long.

Between inflation, this drought, not allowing imports and God knows what other problems there are here, I don't think this economy can hold on for to long. But we have been thinking that for years now.

 

[willwright]

I think its fair to say the policies of the government over the last decade would not be recommended by many economists. They were exceptionally lucky during the same period with constantly rising commodity prices and growing demand for manufactured products from Brazil. But when you implement bad policies sooner or later the consequences will come back to bite you, could be 2012 is the year the whole thing unravels, sure looks like it at this point. Will it be as bad as 2001, who knows but I doubt there will be another commodity boom like the one that saved them in the first decade of the century.

 

[dennisr]

Nationalize YPF, down 10%? Crazy when you consider Argentina is starving for foreign investment. It is sad, country has all the potential to be one of the richest countries on the planet. Who can figure?

http://finance.yahoo.com/q/bc?s=YPF&t=5d&l=on&z=l&q=l&c=

 

[French jurist]

Nice factual posts. For once I'll share the pessimism and I'm afraid for the near future (not for me though, actually I would likely benefit from a big local crisis).

Time will tell if this new wave of crisis will occur but with the current situation, it smells bad.

I hope the country will be able to absorb the social shock.

As for responsabilities, well, where to start, which year? If only this could be the start of a new way of thinking between Argentines.

Like we all agree on, this country has the potential to be a major one.