For all the wheat in Argentina

Argentine farmers are among the world’s most nimble and efficient. They need to be: few countries have been as badly governed as Argentina.

Argentine farmers are among the world’s most nimble and efficient. They need to be: few countries have been as badly governed as Argentina. Over the past 70 years it has often been the farmers and their exports that have rescued the economy only to see populist governments plunder the Pampas to placate their urban voters.

This week Argentina’s farmers have been [protesting] at what they see as a punitive rise in a tax on their exports. With world prices for wheat and soyabeans at record levels, Argentina’s president, Cristina Fernández de Kirchner, reckons that the farmers ought to share their windfall with the rest of the country.

In 2002 Argentina was felled by financial collapse, debt default and a massive currency devaluation. Half the population descended into poverty… But exporting farmers received a windfall from devaluation, augmented when world prices for farm commodities began to rise. So the government imposed export taxes… As an emergency measure this could be justified on two grounds. First, it discouraged farmers from leaving the local market unsupplied, which would have pushed prices up for newly impoverished urbanites. Second, it contributed to a fiscal surplus, helping the government stabilise the economy.

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With farm exports growing… Argentina bounced back strongly. But instead of getting rid of the taxes, Néstor Kirchner, Ms Fernández’s predecessor and husband, intensified them. He even banned beef exports for six months, wrecking years of patient brand- and market-building abroad and encouraging farmers to switch to crops. His public-spending binge has turned robust economic recovery into wild overheating. Inflation is eating into urban incomes and exporters’ competitiveness. At their new punitive levels of up to 40 per cent, the export taxes are likely to trigger a decline in farm output and… a fresh balance-of-payments crisis. And if prices fall, farmers will be in a poor shape to cope.

All this applies even more in other countries with less efficient farmers… If they curb food exports, governments may buy short-term relief for consumers — but at the cost of lowering output and domestic incomes and switching resources into producing other things.

Excerpted from a leader in The Economist, March 29