Effects of US drought trickle down through the Americas(Read article summary)
As prices of corn and other commodities rise, importing countries like the Caribbean and Central America will likely suffer. But what about major exporters like Brazil and Argentina?
• A version of this post ran on the author's blog, bloggingsbyboz.com. The views expressed are the author's own.
With climate change in the United States leading to a major drought this year, the prices of corn and other agricultural commodities are near record highs. The general analysis is that this is bad for food importing countries in the Caribbean and Central America, but good for major commodity exporters like Brazil and Argentina. It should be great times for those exporting countries.
That optimistic scenario for the Southern Cone is probably correct, but here's the glass half empty approach. Several weeks ago, truckers were on strike in Brazil, slowing down the transport of corn and soy. This week, port inspectors in Brazil are on strike, which could lead to delays in exports. In Argentina, the government is again talking about raising export tariffs, a move that led to significant protests in 2008 during a previous commodity boom and would likely do so again. And, of course, Paraguay is in recession territory and just had its president tossed out, partially sparked by a land conflict, even as commodity prices were moving higher.
Commodity exports are good for GDP when prices go up, but that doesn't mean everyone benefits. In fact, it could be that the increased income leads to increased demands from all sectors (government, businesses, unions, citizens) for a piece of the pie. Stability depends on the ability for governments and societies to peacefully resolve those tensions