March 10, 2006

Argentina slashes beef exports to curb inflation

Argentina, the world's No. 3 beef exporter, announced on Wednesday the suspension of most beef exports for half a year to rein in rising domestic beef prices and fight inflation. About 600,000 tonnes of beef should enter the domestic market as a result of the measure.

The cut was designed to protect the purchasing power of Argentina's working and middle classes, beset by 12-month consumer inflation of 11.5 percent through February, said Economy Minister Felisa Miceli.

Domestic beef prices have risen twice as fast as overall consumer price levels since a 2002 currency devaluation.

Prices have climbed nearly 15 percent in the last four sessions at Argentina's largest live cattle market, despite the outbreak of foot-and-mouth disease in cattle last month. 

Sales of high-quality cuts of beef to Europe will be exempt, along with exports guaranteed in bilateral accords. These however, only represent a small percentage of overall sales abroad. Last year, Argentina's beef exports hit a record of US$1.4 billion and rose 24 percent by volume to 596,014 tonnes. The high-quality cuts to Europe constituted 15 percent of the value of exports, although they only make up 5 percent of the total volume.

Argentine President Nestor Kirchner lambasted the beef industry on Wednesday, saying he intends to make sure Argentines can afford the dietary staple.

Inflation through February was down from January but government officials are still wary as price hikes threaten the 3-year-old rebound from deep crisis.

The government has negotiated a series of price accords with supermarkets and manufacturers of basic goods to protect consumers, among them measures to slow price increases in beef.

In November, officials raised export taxes on beef to 15 percent from 5 percent to ensure greater local supply.

Some producers, like Nestor Roulet, vice president of Argentine Rural Confederations, believe the government's measures are counter-productive as businesses will be afraid to invest if the government continues to adopt high-handed measures.