The Economist

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

2015. 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.