Argentina announces 50% increase in nutrition policy budget amid food emergency

07-Nov-2019 - Last updated on 07-Nov-2019 at 15:33 GMT

The Argentinian government declares food emergency law until 2022 as food prices continue to soar and access to food declines.

Although 2019 has witnessed its anticipated record levels of cereal production, it has failed to turnaround the growing intensity of the threat to food and nutrition.

Due to the acute weakening of the local currency and rising inflation rate, cereal prices have spiked at an ongoing and detrimental rate. As a result, the alarming pricing levels are drastically restricting the Argentinian population’s access to food.

In economic crisis

2018 saw the Latin American country’s GDP experience negative growth, depreciating currency and the decline in maize exports due to crop dryness. Subsequently, the challenging landscape has had a severe and continued impact on the economy.

In September 2019, Argentina’s local currency, the Argentine peso (ARS), had depreciated by 97% in terms of its value against the US dollar. In addition, the Buenos Aires Metropolitan Area’s inflation rate reached 52.4%. While the population also experienced rising prices in food and non‑alcoholic beverages, household equipment and medical care sectors.

Food program financing

Valid until 2022, the government has enacted the food emergency law in a desperate attempt to “guarantee adequate access to food, of the vulnerable population in particular,” the Food and Agriculture Organization (FAO) of the United Nations stated in its Global Information and Early Warning System (GIEWS) update.

In a specific effort to drive financial support for food programs, the law establishes a 50% increase in the country’s budget for public food and nutrition policies by the end of 2019. The budget rise is officially estimated at 10000 mn Argentinian pesos (ARS), equivalent to approximately $184 mn.

Since 2018, Argentina has entered into numerous initiatives in a bid to create economic stability and security. Namely, signing with the International Monetary Fund (IMF) a financing arrangement worth about $50 bn, which was subsequently increased to $56.3 bn, represented a dedicated effort to decrease the federal financing needs, enhance the social safety net and lower the current account deficit.

In a bid to improve consumption rates, the Argentinian government also reduced interest rates for credit to enable consumers to buy durables, and it also gave subsidies for both car sales and mortgages. However, due to the lack of foreign currency reserves, a constraint was applied to foreign currency buys on 1 September 2019.

The presence of moderate or severe food insecurity in the total population rose from 19.1% in the 2014‑2016 period to 32.1% in 2016‑2018, the UNs “State of Food Security and Nutrition in the World 2019” revealed. With the impact of food insecurity affecting access and nutrition, along with decreasing purchasing power and rising inflation rates, the number of urban households in poverty is estimated to have risen from 17.9% in late 2017 to 23.4% in late 2018.

Cereal harvest positive outcomes

Maize crops harvested in June 2019 do offer a positive improvement to the food and nutrition problems plaguing the country, as 2019 output levels are anticipated at record levels. Sizable planting and excellent yields have resulted in the high of 57 million tonnes, which amounts to over 40% above the five‑year average.

While the current 2019 wheat crop is set to be harvested in December and is in the developing and flowering stages, enlarged plantings resulting from high prices are driving the positive production forecast.

However, it is not known how dry weather conditions in the main producing Buenos Aires and Cordoba provinces may fully and detrimentally impact crop yields. Yet, with ample crop availability and the considerable drop of the local currency, international markets are increasingly seeking domestic cereals.

Subsequently, maize exports are expected at a record level in 2019/2020, amounting to 65% higher than the five‑year average. To meet demands, over 6 million tonnes of the 2020 — equivalent to 25% of export maize crops — were pre-bought in August 2019 for export purposes. Wheat grain exports are also expected to reach near‑record levels in forecast prediction in the 2019/20, as a result of rising supplies.

Budget considerations

Moving forward, throughout the period between 2020-2022, the government will assess and revise the increased budget quarterly, based on variations in consumer goods pricing.

Identifying the potential stretch this may have on the country’s reserves, the FAO emphasizes: “However, given the already high fiscal deficit, the intended increase in the current budget could escalate the burden on fiscal resources.”