May 31, 2007

 

Soy boom brings hope, pessimism to Paraguay

 

 

As demand for feed continues to surge in China, soybean cultivation is also booming in Paraguay which pundits claim to bring prosperity to one of South America's poorest countries.

 

The flourishing industry has also sparked national debates into the world's fourth-largest exporter of the grain. Big producers herald it as Paraguay's best engine for development while critics say it threatens the environment and the livelihood of thousands of small farmers in a predominantly agricultural country.

 

The benefits of the boom are on full display in this town of 12,000 located in the heart of Paraguay's main soy-growing region in the Itapua department, 370 kilometers (230 miles) south of Asuncion, the capital.

 

Shiny new pick-up trucks cruise the streets in Obligado, rolling past stores offering the latest models in brand name washing machines and mobile phones.

 

Soybean exports by the local cooperative-one of the country's most organized, grouping some 3,500 small and medium-sized farmers-are the motor of the town's economy.

 

Eugenio Closs, a spokesman for the co-op said everyone in town lives in soy.

 

But miles (kilometres) away from the affluent town in down red dirt roads are small farmers living in wooden shacks on parcels of land struggle to survive.

 

Many are subsistence farmers and have abandoned cultivating soy on their plots, saying the heavy machinery and pesticides it requires makes growing the crop less profitable.

 

Farmer Misdonio Benitez, 51, said he shifted from growing soy to cotton three years ago.

 

Some farmers have already sold their land to big producers, adding to disparities in a country where more than 74 percent of the land is owned by 2 percent of the population.

 

Benitez said the big land owners have the means to produce and leaving the small farmers by the wayside.

 

Many farmers have also migrated to cities in search of other work.

 

Toxic pesticides and the increasing clearing of lands to plant soybeans are also raising environmental questions, experts say.

 

Tomas Palau, a sociologist and political analyst in Asuncion who advises peasant groups said soybeans, if taken into account on social costs, are doing more harm than good.

 

Paraguay ranks behind the United States, Brazil and Argentina in soy production. Paraguayan farmers harvested a record 6.5 million tonnes this year due to good weather.

 

While global demand for soybeans is driven by China, Paraguay does not have diplomatic relations with one of its major end markets, exporting most of its soybeans through Brazil and Argentina or Uruguay.

 

Paraguay's main cash crop, soybeans generate some US$600 million in export income and represents more than 30 percent of total exports.

 

But much of the money ends up in the hands of producers, most of them Brazilian, and little in state coffers, critics say.

 

The Paraguayan economy relies heavily on soy and beef exports. An underground economy of smuggled and counterfeit goods also flourishes, estimated to be around the same size as the official one. Corruption and smuggling are reportedly rampant.

 

The soy boom has cynics say the country being dependent on soy.

 

Fernando Masi, a senior economist at the Centre for Analysis of the Paraguayan Economy said the country needs to diversify or they will be tied to international commodity prices.

 

With many soy producers seeing profits, the cash-hungry government has said it wants to impose taxes on soy exports.

 

But producers have resisted, arguing a 10 percent value-added tax they pay on gasoline and farm machinery is helping to spread soy's benefits.

 

Facing a backlash from producers, the government recently backtracked on the tax proposal.