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Argentina and Beef Exports to the United States


Argentine flag with a cow

Number: 460
Mnemonic: ARGBEEF
Name: Argentina and Beef Exports

I. Identification

1. The Issue

Argentina is a country of strong agricultural traditions. Cattle ranching has been a main economic base for the residents of the plains (Pampas) for over 200 years. Nearly all of the cattle raised and slaughtered in Argentina are consumed domestically. In recent years, however, Argentina has pushed for expanded exports in cattle products, namely meat. In the summer of 1997, the United States lifted a ban on fresh meat imports from Argentina because of proof that Argentina had eradicated hoof-and-mouth desease.

This permission by the United States to bring in fresh beef from Argentina is almost certain to start a trend of permissions from around the world for fresh Argentine beef, as many countries have the same agricultural standards for this sector of products as does the United States. Increased exports from Argentina will put market pressure on the ranchers to expand production, which will lead to overgrazing and habitat destruction unless measures are implemented for ecological conservation. Currently, there is very little examination of the potential for habitat destruction which increased cattle ranching poses. However, there are already debates over the possibilities of legal reform in Argentina to address environmental issues.

2. Description

The Land Brief History Market and Overgrazing Legal Difficulties

political map of Argentina

The Land of Argentina

Argentina is the second largest country in Latin America and occupies most of the southern portion of the American continent. Its total area is about 1,068,300 square miles (about the size of the U.S. east of the Mississippi River). Argentina is bordered by five countries - Chile to the east, Bolivia and Paraguay to the north, and Brazil and Uruguay to the northeast. On its east and south, Argentina has an extensive Atlantic coastline. Its north-south length is about 2,270 miles, and its greatest width is about 890 miles. Approximately one-fourth of the total area is given to the flat, fertile Pampas of east and central Argentina. This region is subdivided into the eastern, humid Pampas, and the dry Pampas to the west. To the south of the Pampas, south of the Rio Colorado, is Patagonia, which is a pattern of arid, windy plateaus and a few ravines. The soils of the Pampas are among the richest in the world and consist of a deep accumulation of loose, windblown materials and is nearly entirely free of stones. This soil is used for both farming and ranching, with ranching extending into the Patagonia region, where the climate and soils are less rich and where farming is less profitable.

Brief History of Argentine Beef

Argentina's vast grassland Pampas host most of the country's cattle (and some sheep). Cattle raising in these grasslands dates back to the Spanish arrival in South America. The first cattle, horses, and sheep were introduced by the early Spanish settlers. The cattle were small animals without much meat on them, and they were used mainly for hides and jerked beef (cured meat which does not require storage). After the 1880's, free-range cattle raising was replaced in part by fenced-in cattle ranching. About this time, high-grade beef cattle breeds were introduced. The construction of railways by foreign, mainly English, investors made it possible to ship stock and crops to markets and ports. Refrigerating plants and refrigerator ships permitted the meat to be exported.

Market and Overgrazing

Argentina has entered into the free-trade group MERCOSUR, and through that association has become the supplier of 80 percent of beef to Chile. More recently, the United States lifted the ban on fresh meat imports from Argentina, and will allow it to reach the agreed quota of 20,000 metric tons a year with a mixture of processed and fresh beef products. The increased export of Argentine beef requires an increase in cattle cultivation in the grasslands. The grasslands themselves are not inexhaustible, and so as cultivation expands, Argentina will have to confront the destruction of the ecosystem by overgrazing, or change the nature of cattle ranching in the country.

Legal Difficulties in Conservation and Environment

Argentina is a decentralized, federal system like the United States. In this system, provincial and municipal governments have great autonomy, property rights are respected, and federal authority is relatively limited. This limitation is especially evident in discussions of control over property, with respect to the conservation of natural resources, land use and protection of the environment. In this decentralized system, there is very little comprehensive land use planning at any level of government. Regulatory systems that are adopted at the national, provincial, and local level are "seldom coordinated and, as a result, are often overlapping, contradictory and inefficient."

3. Related Cases

4. Draft Author:

Colleen Reed, Fall 1997

II. Legal Clusters

5. Discourse and Status:

AGReement, COMPlete

The United States Department of Agriculture agreed with the inspectors from both countries that Argentine beef is now certified as free of hoof-and-mouth desease.

6. Forum and Scope:

UNIlateral

The agreement was actually a simple change in U.S. importation rules which now classify Argentina as being free of the disease. The reason that this agreement would be considered bilateral is that Argentina officials had to provide the proof of "clean" beef to the U.S. and have both countries work together on inspections in order for the meat to be certified as desease-free.

7. Decision Breadth:

2

8. Legal Standing:

Law though "import restriction" is more accurate.

Pampas farmland

III. Geographic Clusters

9. Geographic Locations

a. Geographic Domain: South America

b. Geographic Site: Eastern South America

c. Geographic Impact: Argentina

10. Sub-National Factors:

NO

11. Type of Habitat:

TEMPERATE

IV. Trade Clusters

12. Type of Measure:

QUOTA

13. Direct v. Indirect Impacts:

INDirect

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: NO

b. Indirectly Related to Product: YES (meat)

The increased export of Argentine beef requires an increase in cattle cultivation in the grasslands. The grasslands themselves are not inexhaustible, and so as cultivation expands, Argentina will have to confront the destruction of the ecosystem by overgrazing, or change the nature of cattle ranching in the country to incorporate more sustainable cultivation practices. The farming of hay (alfalfa) for cattle consumption is one way in which the Argentine beef industry could grow without continued overgrazing. The difficulty with that change is that the "range-fed" cattle are prized for the very qualities which are produced by ranching on the grasslands - little fat and a tangy taste due to consuming only the native grasses. The switch to farm-fed beef would mean that the meat produced would move towards the United States standard of meat, which is more marbled with fat and has a different taste due to the types of feed which the cattle are given, including hay and corn.

c. Not Related to Product: NO

d. Related to Process: YES

15. Trade Product Identification:

MEAT

16. Economic Data

Recent Economic History (General)

After decades of economic decline and chronic bouts of inflation, Argentina began an unprecedented, profound economic restructuring in 1989. The Government privatized most state-controlled companies, opened the economy to foreign trade and investment, improved tax collection, and created private pension and worker's compensation systems. Average annual G.D.P. growth exceeded 7 percent from 1991 to 1994, driven primarily by consumption. The 1995 financial crisis and recession demonstrated that Argentina's economy is vulnerable to abrupt changes in foreign capital inflows. However, earlier structural reforms helped the country maintain some stability and return to economic expansion as soon as the markets stabilized again. The government has continued to demonstrate credibility through further economic adjustment and conclusion of a new 21-month Standby Agreement which the International Monetary Fund approved in April 1996.

Argentina's principal economic policy challenges are:


These challenges are being partially met by the increase in beef production across the grasslands. The increased production and export provides more jobs in all areas of the industry, from cultivation and maintenance of the herds to slaughter and meat processing plants. The reform of the banking sector has ment a change in the amount of foreign capital which producers can use in their businesses at all levels. The Argentine government is using the opening of the financial side of the markets in combination with a crackdown on corruption and tax evasion to lure more foreign investors into the country. The widening of trade with the United States makes the cattle industry an hospitable investment target for foreign and domestic capital.

Foreign Trade

Many U.S. and other foreign firms continue substantial direct investment and have demonstrated interest in taking advantage of opportunities in Argentina as part of the MERCOSUR union with Brazil, Paraguay, and Uruguay. Foreign capital is again abundant and Argentina's country risk (i.e., the interest rate spread between Argentine and U.S. debt instruments of comparable duration) has declined since the 1995 recession. Argentina's heavy reliance on foreign capital and the fixed dollar-peso exchange rate have made the country vulnerable to fluctuations in capital flows. However, significant structural reforms in Argentina from 1989 onward helped Argentina weather financial storms without devaluing and without compromising its market-oriented policies. President Clinton's recent trip to Argentina highlighted the relative stability and respect which Argentina's economy has in regards to current and future trade relations. Clinton was unable to offer up any concrete proposals for trade, however he did announce his renewed dedication to an hemispheric trade group, and singled out Argentina as a potential leader in that group.

MERCOSUR, a customs union of Argentina, Brazil, Paraguay and Uruguay, entered into force January 1, 1995. The entry into force of MERCOSUR, improved industrial productivity, and economic stabilization in Brazil have all contributed to dynamic growth of Argentina's foreign trade. MERCOSUR member countries have preferential trade arrangements with each other. Argentina's MERCOSUR partners accounted for less than one third of Argentina's exports during 1995. Argentina's exports to Brazil (more than 25 percent of Argentina's total exports) were almost $5.4 billion in 1995--about 60 percent above the level in 1994 and more than five times that of 1990. As a result, macroeconomic stability in Brazil is an important variable for Argentina's foreign trade. Additionally, the inclusion of Chile as an association member with MERCOSUR offers great benefit to Argentine exports.

With the opening of trade between neighbors, in 1996 Chile emerged as Argentina's second-largest individual market for beef. Chile imported 61,949 metric tons of beef from Argentina from January-October of 1996. Argentina now supplies 80 percent of Chile's beef imports. The United States has been a constant consumer of Argentine beef products, mostly in the canned soup and pet food markets. The opening of the market to fresh beef for human consumption will raise the market potential in the United States to that of near Chile's.

map of Argentina with province



divisions

The Economy Surrounding Argentine Beef Exports to the United States

Under the Uruguay Round of the General Agreement on Tariffs and Trade, Argentina is guaranteed a quota of 20,000 metric tons of beef, provided the meat passes U.S. Department of Agriculture standards for disease. Argentina was certified free of hoof-and-mouth last year, and in the summer of 1997 received permission to begin importing raw meat into the United States. According to some reports, the increased demand in foreign countries for Argentine meat has caused beef prices to increase in the local markets.
Industry Output: Beef 2.4 million tons (1995)
Meat $1,126 billion (1995)

There are approximately 230,000 cattle producers in Argentina, and the stock is distributed in the different provinces as follows:
Province Share of Total
Buenos Aires 37
Cordoba 15
Santa Fe 11
Corrientes 8
Entre Rios 7
La Pampa 6
Chaco 4
Formosa 3
All other 9

1994 Top 5 ranchers of Cattle and Buffalo
Rank CountryCattle% of Total% of World Production*
1.India 272,655 26.4 2.3
2.Brazil 144,300 14.0 10.1
3.China 113,160 10.9 6.0
4.United States 101,749 9.8 24.9
5.Argentina 54,875 5.3 5.5

* Note that the United States ranks fourth in the number of head of cattle, but first in the percent production of beef. The disparity of these numbers is a result of the different breeds of cattle and the purpose for which they have been raised. The U.S. raises most of its cattle for meat. These cattle are given grain and other feed as well as allowed to graze, which is combined with extensive veterinary care. Free-range cattle and those from poorer areas are usually leaner and have less meat than grain-fed cattle.

For more statistics summarizing the major participants in international beef trade and consumption, go to the U.S. Department of Agriculture's Foreign Agriculture Service Online World Agricultural Production for March, 1997.

17. Impact of Trade Restriction:

HIGH

The opening of the U.S. market to increased quantities of fresh beef will have a negligible impact on the domestic U.S. beef industry. On the Argentine side, the economics are more complex. The majority of prime Argentine beef (not animal food) is consumed domestically. The opening of the U.S. market to Argentine imports is a positive force on the expansion of the cattle ranching business. That potential expansion has a negative impact on the environment supporting it.

18. Industry Sector:

FOOD

19. Exporters and Importers:

Argentina and USA
Case Exporter:Argentina
Case Importer: United States
Leading Exporter:Australia1.04 billion metric tons (1996)
1.10 billion metric tons forecast for 1997
Leading Importer:United States 940 million metric tons (1996)
1.034 billion metric tons forecast for 1997

V. Environment Clusters

20. Environmental Problem Type:

HABITat

21. Name, Type, and Diversity of Species

the Pampas at sunset

The lands which are used for livestock cultivation stretch from the Pampas into Patagonia. The Pampas is an area with very fertile soil and few trees, making it ideal for both farming and livestock cultivation. Its resources are not endless, and overgrazing is a huge future problem that could lead to erosion and the destruction of native grasses and wildlife. Patagonia has a semi-arid climate, and increased cattle grazing and heavy farming (monoculture) have combined with strong winds to produce desertification that will be difficult to reverse.

Name: Grasslands

Type: Habitat

Diversity: Low

22. Resource Impact and Effect:

MEDIUM STRCT resource depletion

23. Urgency and Lifetime:

HIGH, but the country may still have plenty of time to reverse the problem.

24. Substitutes:

CONSV (conservation)

VI. Other Factors

25. Culture:

YES

Las Pampas

In Argentina, beef has been a staple food for nearly a century. Since the beginning of the twentieth century, when the average person in Argentina consumed 250 pounds per year, beef has been the primary meat product in the Argentine diet. It is estimated today that Argentina is one of the largest consumers of beef in the world, second only to the United States. However, Argentina only has a population of 33 million people, while the United States has 230 Million people. Thus, the amount of beef per person for Argentina is much larger than that of the United States. The average Argentine consumer uses 190 pounds per year, which is approximately two-and-a-half times than the average person in North American, who consumes 78 pounds per year.

In the U.S., industry analysts have maintained that the market for Argentine beef for human consumption (steak) is very limited in the United States because domestic cuts of meat are much cheaper to produce. Additionally, and perhaps more importantly, American consumers are not accustomed to the taste of South American beef, which is grass-fed and less tender than the grain-fed beef of the United States.

26. Trans-Boundary Issues:

NO

27. Rights:

NO

28. Relevant Literature

Argentina. Funk and Wagnalls New Encyclopedia, Volume 2. 1994

Argentina Business: Fundacion invertir Argentina web site: http://www.invertir.com/

The Argentine Business Gateway web site: http://www.externa.com.ar/argentinebeef/

Beef and Veal Exports, Selected Countries. U.S. Department of Agriculture, Foreign Agriculture Service. web site: http://www.fas.usda.gov/ (note: this is carcass weight equivalent)

Beef and Veal Imports, Selected Countries. U.S. Department of Agriculture, Foreign Agriculture Service. web site: http://www.fas.usda.gov/ (note: this is carcass weight equivalent)

Cattlemen on the Web: The Beef Handbook -- Economics. National Cattlemen's Beef Association web site: http://www.ncanet.org/

CIA World Factbook web site: http://www.odci.gov/cia/

FY 1997 Country Commercial Guide: Argentina, U.S. Department of State, Bureau of Economic and Business Affairs, August 1996. web site: http://www.state.gov/www/about_state/business/com_guides/

http://www-personal.engin.umich.edu/~antoniak/arg.htm

Lonely Planet online - http://www.lonelyplanet.com

Map of Argentina - political - http://www.lonelyplanet.com/maps/sam/

Map of Argentina by province - http://dns.uncor.edu:8001/land/map_full.htm

Melekian, Nick, Scott Fryzel, Fiona Chan. International Marketing: Argentina. 1996. web site: http://www.rzuser.uni-heidelberg.de/~nmelekia/argdoc.html

Nolan, Sean F. The State of the Argentine Environment: An Overview. web site: http://www.law.pace.edu/landuse/oversf.html

Photos of the Pampas - http://argentinae.com/pampa/pampaf.htm

Seminar on the Law of Sustainable Development in Argentina: Presentation by Arq. Rodolfo Pedro Gasso. Pace University School of Law, Land Use and Community Alliance Service. web site: http://www.law.pace.edu/landuse/

Sims, Calvin. "South American Beef to Broaden Markets." New York Times News Service. October 5, 1995.

Snyder, John D., Journal of the Americas, March-April, 1996.

U.S. Geological Service web site: http://www.usgs.gov

World Agricuture Production, U.S. Department of Agriculture,Foreign Agriculture Service. March, 1997. web site: http://www.fas.usda.gov/


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