(Steven Felgate) #1

34 The Americas The EconomistAugust 4th 2018


1

2 reported that the central bank will restrict
Itaú to a minority stake inXPInvestimen-
tos a broker that has been a thorn in banks’
sides which Itaú wants to buy.
The central bank is also trying to nudge
down borrowing costs. Last year it obliged
banks to switch customers who repeatedly
roll over credit-card debt to cheaper loans.
It recently eased some reserve require-
ments on banks.
The expansion of lending by state
banks at ruinoussubsidised rates under
Dilma Rousseff president for five years un-
til her impeachment in 2016 has been re-
versed under her successor Michel Temer.
BNDEShas cut disbursements from 188bn
reais in 2014 to just 71bn reais and has intro-
duced higher fixed and floating rates
linked to the market. Dyogo Oliveira its
head says it has switched lending from big
companies to infrastructure and smaller
firms. Banco do Brasil has cut 10000 jobs
and raised itsRoEfrom a paltry 4% in late
2016 into double figures.
Removingsubsidisedlending and oth-
er distortions argues Arthur Carvalho of
Morgan Stanley should have an extra
macroeconomic benefit. It should enable
the Selic to be lower other things being
equal. The link between monetary policy
and the interest rates paid by businesses
and households would also be tighter.
And if the next president is serious about
getting Brazil’s public finances under con-
trol and long-term interest rates fall invest-
ment and growth should at last pick up. A
narrower gap between long- and short-
term rates would squeeze banks’ margins.
But demand for credit would rise—and a
stronger economy would mean faster sail-
ing for all. 7

C

OWS sheep pigs and llamas are the
stars of ExpoRural Argentina’s biggest
agricultural show which took place on July
18th-29th. They made a racket in their stalls
at a Buenos Aires showground as their
owners brushed and vacuumed them to
prepare for a barnyard-themed beauty
contest. Outside spectators filled a grand-
stand to watch Hereford bulls parade be-
fore a judge the beasts’ hooves sinking into
the mud. Nearby Toyota Ford and other
manufacturers showed off new 4x4 pick-
up trucks. House-sized combine harvest-
ers loomed over the crowd.
Argentina’s economy is in a slump and
inflation is at 30% but ranchers are cheer-

ful. After a decade of decline beef exports
began recovering in 2015. Last year Argenti-
na re-entered the list of the world’s top ten
beef exporters. Foreign sales surged by
60% in the first half of this year. That is be-
cause Mauricio Macri Argentina’s presi-
dent since 2015 has ended the populist
policies of his predecessors which ground
ranchers into mince.
In 2005 Argentina’s then-president
Néstor Kirchner imposed a 15% tax on beef
exports in an effort to hold down inflation
which was around 12% and to please vot-
ers. Each Argentine eats 59kg (129lb) of beef
a year; only Uruguayans consume more.
When the levy failed to control prices
Kirchner who died in 2010 banned ex-
ports for 180 days. That worked briefly. Be-
tween 2007 and 2011 ranchers sent more
than 12m cows a fifth of the herd to the
slaughterhouse creating a glut. But then
they stopped breeding cattle or switched
to smaller breeds that required less feed
and produced less meat. Prices jumped.
Both producers and consumers suf-
fered. Exports plunged from 771000
tonnes in 2005 to 199000 tonnes in


  1. More than 15000 farm workers lost
    their jobs. Some ranchers switched to
    soyabeans (growing them not eating tofu
    themselves); others moved to neighbour-
    ing Uruguay. Foreign leather firms such as
    Italy’s Italcuer left the country. The third-
    largest exporter of beef in 2005 Argentina
    fell to number 11 by 2013 during the presi-
    dency of Kirchner’s widow Cristina Fer-
    nández de Kirchner. Even tiny Uruguay
    and Paraguay sold more.
    Mr Macri is now repairing the damage.
    In his first week in office in December 2015
    he scrapped the export tax and floated the
    peso making exports more competitive.
    He has opened new markets. In January
    this year China agreed to buy chilled Ar-
    gentine beef for the first time. On July 23rd
    Mr Macri boasted in a tweet that the first
    shipment of Patagonian beef had left Ar-
    gentina for Japan under an agreement
    reached in May. Argentina is on course to
    export 450000 tonnes of beef this year up
    from 312000 in 2017.
    “We are still very far from capacity”
    says Ulises Forte head of Argentina’s Beef
    Promotion Institute. Ranchers are rebuild-
    ing their herds. That takes time. With inter-
    est rates at 40% borrowing to expand is ex-
    pensive. Even so ranchers are bullish. “The
    situation is improving day by day” says Mr
    Forte. Mr Macri who is expected to run for
    re-election next year hopes for a political
    payoff. “For every100000 tonnes more we
    export we create 10000 jobs” he says. To
    secure victory he will have to spread the
    ranchers’ good cheer to Argentines with
    other beefs. 7


Argentina’s beef exports

Bull market


BUENOS AIRES
The economy is on the verge of
recession. But cattle ranchers are happy

“R

ELAX. Unwind. Centre. Enhance.”
These hippy-dippy blandishments
will appear in big bright letters on govern-
ment-owned shops in Nova Scotia a prov-
ince in Canada’s north-east. They will add
colour to outlets that otherwise resemble
post offices. Business will begin on Octo-
ber 17th when the sale of recreational can-
nabiswill become legal across Canada. In
the western province of Alberta Tokyo
Smoke a private-sector firm plans to open
pot shops that are more like hipster cafés.
In British Columbia illegal outlets have
long masqueraded as “dispensaries”. New-
ly legal some plan to kit themselves out
like upmarket pharmacies.
Under Canada’s scheme for legalising
cannabis the federal government will reg-
ulate production and set minimum stan-
dards for safety. Consumers must be 18 or
older and may possess no more than 30
grams. But each of the ten provinces and
three territories will decide how to distri-
bute the stuff to 12m potential consumers
(the number of Canadians who say they
have indulged at least once) plus visitors.
In typically Canadian fashion every
province’s legislation has its own “quirks”
says Michael Armstrong a business pro-
fessor at Brock University in Ontario. Five
will make the sale ofcannabis a provincial
monopoly as most provinces do for spirits.
Government-run shops will take especial-
ly seriously their mission to safeguard pub-
lic health and supplant the black market
says Rebecca Brown of Crowns Creative
an advertising agency that specialises in

Cannabis in Canada

The high street


OTTAWA
The shopping experience will vary a lot
across the country

Taking party parsley to parliament

Correction:Our Bello column on July 28th (“Damned is
the peacemaker”) said that former FARCguerrillas
granted seats in Colombia’s congress could not vote in
the legislature. They can. Sorry.