The drought in Argentina is mainly caused by the La Niña weather phenomenon, which is characterized by cooler-than-normal sea surface temperatures in the central and eastern Pacific Ocean. La Niña tends to reduce rainfall in southern South America, especially during the summer months.
According to the National Meteorological Service (SMN), the drought in Argentina is the worst since the SMN started to record data. February 2023 received 41.9% less rain than it usually does. The lack of precipitation has affected most of the country’s key agricultural regions, such as Buenos Aires, Córdoba, Santa Fe and Entre Ríos.
The drought has also been exacerbated by high temperatures, which have increased evaporation and water demand. The SMN reported that January 2023 was the second hottest month on record, with an average temperature of 25.6°C, 2.1°C above the historical average.
How is the drought affecting Argentina’s economy?
Argentina’s economy depends heavily on its agricultural sector, which accounts for about 10% of its gross domestic product (GDP) and more than half of its exports. The country is the world’s top exporter of soybean oil and meal, the third-largest exporter of corn and a major supplier of wheat and beef.
The drought has severely damaged these crops and reduced their yields and quality. According to the Rosario grains exchange, the 2022/23 wheat harvest reached just 12.4 million tonnes, down from 22.4 million tonnes harvested the previous year. The soybean and corn harvests are also expected to be significantly lower than initially projected.
The drought will reduce exports in 2023 by nearly eight billion dollars and this will have a heavy direct impact on the state coffers, which will receive more than one billion dollars less in taxes on exports of soy, corn and wheat, the three crops that cover the largest agricultural area in the country.
The loss of income will also affect the farmers, who have faced higher costs for irrigation, fertilizers and animal feed. Many small and medium-sized producers have been forced to sell their livestock or declare bankruptcy. The drought has also increased food prices and inflation, which reached 48% in 2022.
The economic crisis caused by the drought comes at a time when Argentina is already struggling to recover from the impact of the COVID-19 pandemic, which caused a contraction of 9.9% of its GDP in 2020. The country is also facing a large fiscal deficit and a heavy debt burden, which has limited its access to international financing.
How is the drought affecting Argentina’s politics?
The drought could also have serious political consequences for Argentina and its neighbors. Brazil’s finance minister Fernando Haddad expressed his concerns about the situation in a meeting with U.S. Treasury Secretary Janet Yellen on May 11, 2023.
Haddad said that Brazil was worried that the economic and social crisis in Argentina could affect its “political destiny” and lead to the rise of an extremist government. He said that Brazil had seen an increase in far-right governments in other Latin American countries, such as Venezuela and Bolivia, and that it did not want to see a similar scenario in Argentina.
Haddad said that Brazil was keeping a close eye on Argentina and that it was willing to cooperate with the United States and the International Monetary Fund (IMF) to help its neighbor overcome its difficulties. He said that a solution for Argentina had to go through the IMF, which is currently negotiating a new debt restructuring program with the country.
Argentina’s president Alberto Fernández faces a tough challenge to balance his economic policies with his political agenda. He belongs to a center-left coalition that includes former president Cristina Kirchner, who is now his vice president and has a strong influence over his government.
Fernández has tried to maintain a moderate stance on economic issues, such as fiscal discipline, inflation control and debt negotiation. However, he has also faced pressure from his more radical allies, who demand more social spending, subsidies and state intervention.
Fernández will have to face mid-term elections in October 2023, which will be crucial for his political future and his ability to govern until 2025.
