Drought worsening in Argentina and Paraguay

Jan 20, 2012 12:00 AM

Drought conditions are worsening in Latin America, especially Argentina and Paraguay, and may become a flash point for political and rural unrest, latest data and sector analysis said.
In Argentina's politically fraught agriculture sector, anger over what farmers' representatives see as ineffective policies of President Cristina Fernandez de Kirchner surfaced again in pronouncements by farmers' representatives. Fernandez is accused of refusing to increase a state emergency fund for tackling the drought. The president has also turned down pleas for a fiscal review to ease the tax burden of farmer communities.

"Farmers are always expected to pay up but are never entitled to government help," Argentine Agrarian Federation chief Eduardo Buzzi said. "The government wants farmers approaching the counter in order to pay, not asking for money."
Farmers' representatives say Fernandez is even less responsive to their demands and expectations since last year's landslide victory. Buzzi said the distressed farmers, especially those with small or medium-sized holdings, expected the government to drop export duties on grain and oilseed exports.

There are widespread fears that Argentina is facing a disastrous harvest at corn and soy farms left with scant irrigation in unusually hot weather with few signs of rainfall. Argentina supplies about 20 % of the world's demand for corn and 12 % of soybeans. But revised estimates of crop damage by drought pushed international prices for both corn and soybeans.
Predictions of a cooling weather were tempered by meteorologists' warnings that moisture from a cold wave, thought to be imminent, could be uneven and not ease the crisis.

The continuing drought means Argentine exporters won't be able to substitute for shortfalls in US corn supplies depleted by a poor harvest in the United States.
Paraguay also declared an emergency after drought threatened to cut back its harvest. The Paraguayan government has put in place special drought relief for farmers for at least three months until the weather outlook clears. Drought has affected crops in Brazil and other neighbouring countries.

Weather officials said the heat wave was related to the regional La Nina phenomenon, which results in the cooling of waters in the equatorial Pacific Ocean, causing upsets in marine life as well as agricultural production.
The effects of the drought are likely to reverse some of fiscal gains made by a recent upsurge in commodity prices and exports and increased foreign direct investment. In the meantime, fiscal planners and investors are waiting anxiously to weigh the impact of the eurozone crisis on Latin America.

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