To Be Global or Not to Be?
Is that the question?
Argentina’s agribusinesses and the globalization phenomenon

Globalization is a process by which the increasing communication and interdependence among the various countries of the world unites markets, societies and cultures through a series of social, economic and political transformations that gives them a global character. Thus, modes of production and capital flows take shape on a global scale, while governments are gradually losing power in the face of what has been called the “networked society”. 

Fuente:http://es.wikipedia.org

Given this worldwide trend, what should be the role of a country such as Argentina? Given this worldwide trend, what should be the role of the Argentine agribusiness sector? Are the leaders of this country studying this issue? Have we identified the challenges and opportunities that Argentina is facing as a result of this new global trend?

Medium- and long-term strategic thinking is required to analyze this issue.

Undoubtedly, chronic obstacles to development, which are expressed in our country’s development indicators, such as the population poverty index of and the distribution of income and wealth within Argentina, do not allow the main actors responsible for public and private decision-making to devote time to analyzing the problems that we bring to your attention in this paper.

In the days when technology made it impossible to communicate cheaply and efficiently, countries could allow themselves to avoid the impositions of reality. Many populations consuming low-quality and relatively expensive products as a result of living in a closed economy was a possibility until the eighties. The Internet, among other advances, makes it possible to find ways to address the inefficiencies relative to not only international financial market operators, but also the end consumers of consumer goods. This new characteristic means that the production structure changes more rapidly than it has in the past. The market finds ways to address situations which, in the past, a country could have addressed through its economic policy.

In more objective and practical terms, if the average wage of a textile industry worker is USD 5.00/hour in the United States, USD 2.50/hour in Argentina and USD .20/hour in the People's Republic of China, this situation would eventually guide this market, notwithstanding tariff barriers and other temporary delays. In other words, if the People’s Republic of China has uniform quality standards and productivity levels, then it should be the global provider of clothing.

Given this situation, one may adopt either a reactive or a proactive attitude; that is, one may either react in a timely manner or when it is too late. In practice, the sooner the situation is assessed, the lower the cost of adapting to that situation will be.

Expressing the title of this paper in cruder terms, globalization means that regions, countries, economic agents, businesses and people eventually do what the world market considers them to be best at doing.

The most powerful countries or groups of countries are more likely to be able to forestall the effects of globalization while they adapt to this demanding trend.

Argentina has reduced its share in world trade from 0.43% in 2003 to 0.37% in 2004.

It is likely that the consequences could affect a country like ours in a faster and more direct way.

How would this country’s agribusiness sector - a vital force in the economy and one of its main foreign exchange contributors through exports - be affected by this trend? It could be the most “globalized” sector of the Argentine economy, with products that are sought after worldwide and that are highly competitive. Particular attention should be paid to the agribusiness sector, since it competes under inferior conditions, on the one hand, with restrictions and inefficient infrastructure at the national level and, on the other hand, the unfair competition from other suppliers worldwide, caused by subsidies, for example. Notwithstanding these competitive advantages of Globalization, there are also challenges that must be met. In light of globalization, what to produce and how to produce it seems to be the strategic question for agribusinesses. The People’s Republic of China, one of Argentine agribusinesses’ major clients, does not pose as clear a threat as the case of textiles previously mentioned, but their projections for the future indicate that they will be. Greater value added per product is one of the formulas that maximizes the Asian giant’s competitive advantages: relatively cheap labor. Aligned with this challenge are the ideas expressed by Otto Solbrig at the last Aapresid Congress, held in Roasrio, Argentina in August 2005. The professor emeritus from Harvard University stressed the fact that: “if one doesn’t innovate, one stagnates and eventually disappears" We must accept new technologies, but intelligently, of course. We must enhance our commodity exports with higher-value products. If, instead of exporting soya beans, we were to export certified biotechnologically modified soya seeds we would derive much more benefit”...

In other words, we should boost our current advantages by adding value to agroindustrial products, through technological innovation. At this juncture, it would be worthwhile to provide some data on value per ton of agroindustrial exports: New Zealand 800 dollars/ton, Australia 400 dollars/ton, Argentina 200 dollars/ton. It is evident that Argentina must work towards attaining the value that New Zealand has reached for its exports in this sector..

The Republic of Chile could serve as an example of how a strategic analysis of this situation can produce benefits. Faced with the challenges imposed by globalization, our sister republic analyzed and signed, among other agreements, a free trade agreement with the United States. This agreement allows Chile direct access to all NAFTA markets. Its agroindustrial products do not suffer the consequences of the barriers imposed on the other countries for entry into those markets.

In light of the foregoing, no sector of the economy can afford not to constantly review its objectives in planning for the future. Perhaps a more strategic and less dispassionate line of thought will enable countries like Argentina to adopt a practical approach to integration, such as that proposed by the FTAA, for example. A business forum is being organized, within the framework of the Summit of the Americas to be held in Mar del Plata in November, to discuss these issues. The agribusiness sector should make every effort to participate in this forum.

The globalization phenomenon is a reality and the manner in which each country, and all economic sectors within each country, prepares itself will determine whether this phenomenon will generate increased levels of development and greater benefits for its inhabitants.

Bernardo C. Piazzardi
Fundación Nueva Generación Argentina
www.fnga.org.ar