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”.
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
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
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
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