Argentina - Where the Wind Comes Sweepin' Down the Plain
The fertile Pampas region is on its way to becoming a world leader in agro-business.
SANTA ROSA, ARGENTINA — With the wide, flat Pampas laid out in front of him like a king-sized picnic blanket, Jaime Murphy pulls his pickup flush with an electric fence holding in a herd of curious cattle. He tells a visitor, "Say hello to our friends from the George Soros family."
The beef cattle looking on with bright, wary eyes are some of the 3,000 head that Hungarian-born American billionaire George Soros is fattening on Mr. Murphy's land. And the fact that Mr. Soros, known for his savvy international investing, is paying for cattle to chomp alfalfa here is a sure sign that things on the Pampas aren't what they used to be.
Once the domain of gauchos and bolas - Argentine cowboys and their signature cord-and-ball cattle-tangling tool - the Pampas is on the verge of a renaissance that many observers expect will once again make Argentina one of the world's agro-industrial powers.
The land's legendary fertility and rising world food demand both have something to do with the return of the Pampas. But the determining factor has been changes since 1990 in Argentine tax and export policies.
Until World War II, the Pampas, stretching west from Buenos Aires like a wide-open fan, was known as the "breadbasket of the world." The vast region's agricultural riches helped turn Argentina into one of the world's wealthiest countries.
But after the war, one Argentine government after another forced the country to turn inward. They promoted tax policies that discouraged exports, and nationalist import-substitution programs that favored heavy industry over agriculture.
The Pampas slumbered.
"For several decades, every government, whether democratic or military, followed the same policy of heavy export taxes on agricultural products," says Roberto Lisandro Barry, director of development and investment in Argentina's Ministry of Industry and Trade.
"That's what changed so drastically in this decade," Mr. Barry adds. "One of the first things President [Carlos] Menem did when he came in 1990 was dramatically cut the export taxes. The result has been a boom." Since 1990, Argentina's farm and agro-industrial exports have jumped more than 80 percent, to more than $9 billion.
In August, producers celebrated the first shipment of the country's rich, grass-fed beef to the United States in 63 years. Argentines say this coveted seal of approval will open up potentially lucrative Asian markets.
But the policy changes have meant more than increased production. They have also drawn the attention of foreign investors - like Soros - who in turn are bringing new crops and production methods to the Pampas. They also mean trouble for the region's many small landowners and producers, experts say.
One of these new arrivals is the feedlot. Since Argentina's Indians were driven from the Pampas toward the end of the last century, Argentine beef cattle have always been free to roam large expanses of land. At Mr. Murphy's 12,000-acre La Punilla spread, the gauchos - a dozen men, many with Indian heritage, who either live in neat outbuildings on the ranch or motorcycle to work - still head out on horseback to check the herds or mend fences. La Punilla's cattle still only know a corral when it's time to be washed, weighed, and sold.
But free-range production means smaller, leaner cattle than what the US industry produces. The feedlot, an intensive production method that yields more meat, will change that. And it is on Argentina's horizon. Soros is already working with Cactus Feedlots of Amarillo, Texas, to bring the US practice south.
"There's no question the Argentine people love their beef, but they may have to get used to the meat of grain-fed, lot-raised cattle," says Jorge Casenave, president of a Buenos Aires-based agriculture land investment group. The average Argentine consumes a whopping 150 pounds of beef a year.
A complementary factor drawing foreign investors to the Pampas is the low cost of Argentine agricultural land, Mr. Casenave says. Comparable productive land costs half what it does in the US. But with the globalization of world agricultural markets, land values here are expected to continue an already noted upward trajectory. "That explains why a foreigner, Soros, is now the largest private landowner and largest cattle owner in Argentina," Barry says. "It's not because he's suddenly decided to become a farmer." Soros now owns more than 1 million acres and 370,000 head of cattle in Argentina.
For the locals, the changes offer both promise and peril. The future is bright for farmers who weathered Argentina's high inflation years without an overbearing debt, and who are ready to adapt to demands for higher productivity. "Before, a farmer could make a living with 200 head of cattle, but now he needs 500," says Jorge Silva Colomer, regional director of the National Agricultural Technology Institute (INTA).
Argentina's high-inflation years made farm management impossible and in a sense, unnecessary. "A farmer didn't have to worry about new debt because inflation was always covering it up," Murphy says. "Now that's all changed." As many as 50 percent of Argentina's 600,000 smaller farmers - those with less than 750 acres - could go out of business in the next few years, some observers say.
On the other hand, the years of government neglect mean the country's farmers are entering a globalized market with a jump on US and European producers. "We already know about living without subsidies," adds Murphy, "which is something some of our foreign competition is going to have to learn."
Another global challenge the Pampas faces is erosion. The desert conditions of western Argentina encroach every year on valuable farmland. Both INTA and the Agriculture and Cattle Association of La Pampa are trying to address the threat. "A lot of farmers would look at this field, turn up their nose, and say, 'What a mess!' " says Murphy, looking over a 180-acre expanse of sunflowers, where weeds grow along with the crop. "But we leave it this way on purpose," he says. "It attenuates the impact of rain on the soil, it helps keep in moisture, and reduces soil loss from wind."
Even with such challenges, however, most observers say the Pampas's comeback looks assured. "The factors favoring continued growth outweigh the rest," says Casenave, who notes that the Pampas even has some advantages over the American Midwest. "Our summers aren't so hot," he says with a proud grin, "and our winters are much, much less cold."
Almost as big as Texas, the Pampas is a flat, tall-grass region stretching from Argentina's Atlantic coast west to the foothills of the Andes Mountains. Some historians believe the name comes from a Quchua Indian word for "flat land."
The region's development in many ways parallels that of the American prairie. First inhabited by Indians and then by gauchos - cowboys of Indian and colonial descent who worked cattle left behind by unsuccessful Spanish colonists in the 16th century - the Pampas was opened up by railroads in the second half of the last century.