Wednesday, 8 February 2017

Why did Argentina become a super-exporter of agricultural and food products during the Belle Époque (1880-1929)?

In the first wave of globalization the populations of some extra-European countries were also able to earn high incomes but with low levels of industrialisation. These countries had been recently colonised by Europe (Canada, Argentina, Uruguay, Australia and New Zealand), and their economic growth was based on the rapid expansion of their exports of primary products and on the linkage effects of these exports with other economic activities. 

This was the case of Argentina during these years. According to the recent estimates of world trade published by Federico and Tena-Junguito (2016), Argentine exports, which represented around 0.8% of world trade during the early 1850s, reached levels of almost 4% in the 1920s .

Figure 1. Ratio of Argentine exports over world exports (% at current prices)
Source: Federico and Tena (2016)

There are very few studies that use a cliometric perspective in order to identify the determinants of such an accelerated growth in exports, which is a necessary condition for the export-led model to work. The objective of this work is to provide a cliometric contribution to this field of study, constructing a gravity model to explain the determinants of the growth of Argentina’s exports between 1880 and 1929. 
To this end, the bilateral export data we need have been drawn from a meticulous review of the Argentine foreign trade statistics. In contrast with the vast majority of the quantitative analyses of this subject, we have studied the annual path of the principal export products; that is, the destinations of each individual product. The following chart summarises Argentine exports in current and constant values (calculated with the prices of 1913) (Figure 2).

Figure 2. Argentine exports, in current and constant values (1913 prices),
in millions of pounds, 1875-1929
Source: Own elaboration according to official Argentine statistics (1875-1929) and Cortes Conde et al. (1965).

As we can see, Argentina’s integration into international markets was successful after the 1870s. But, according to Cortes Conde (1985), it was not until the last decade of the nineteenth century that exports contributed to paying for debt services and to financing imports, which was necessary not only to transform the productive structure but also to cover the consumption needs of the domestic market. 

To analyse export growth, we have separated the products into three groups: 1) traditional livestock exports, which include wool, salted and dried cattle hides, raw sheep skins, bovines, jerked meat and tallow; 2) crop exports, that consider wheat, corn and linseed and 3) processed agrifood exports, which are composed of chilled and frozen beef, frozen mutton, wheat flour, quebracho logs and quebracho extract. As we can see first, although the first group also grew, if we ignore the fluctuations and focus on a long-term perspective, the second and the third groups grew more and at a faster pace.

Figure 3. Breakdown of Argentine exports at constant prices of 1913 (thousands of pounds). Own elaboration. Source: Argentine official statistics.

Our econometric results reveal that the increase in Argentina’s GDP was important to explain the export growth. On the one hand, new lands were successfully incorporated into the productive system. On the other hand, labour and capital, traditionally scarce factors, were supplied from abroad. 

However, obviously without a solvent demand for the type of goods in which the country successively specialised, the export business would not have developed sufficiently. Therefore, the demand for food and raw materials, particularly from the most developed European countries, was essential.

The fall in transport costs was also a contributing factor. However, during the period analysed, the increases or reductions in tariffs did not have a significant effect on the country’s exports as a whole.
These overall results are better understood when analysed by types of product. This also constitutes an original contribution since the literature has generally not differentiated between different export goods. In this case, significant peculiarities may be observed. The development of the Argentine economy constituted an obstacle for the growth of its exports of livestock products (unprocessed), as agriculture competed for the land on which this activity was developed. Furthermore, the emergence of a meat-processing industry gave rise to a preference for the export of frozen and chilled meats as opposed to live animals. The opposite was the case for raw and processed agricultural and livestock products that experienced an improvement in exports as a result of the country’s economic growth. Tariff protection only had a significant effect on agricultural products, particularly wheat, which, from the end of the nineteenth century, faced increasing obstacles in some continental countries.

Vicente Pinilla
Augustina Rayes


The blog post was written by Vicente Pinilla (Universidad de Zaragoza) and Agustina Rayes (Universidad Nacional del Centro de la Provincia de Buenos Aires).


The working paper can be downloaded here: http://www.ehes.org/EHES_107.pdf




References

Cortés Conde, R. (1985): “The Export Economy of Argentina, 1880-1920”, in R. Cortés Conde and S.J.Hunt (eds.), The Latin American economies: growth and the export sector 1880-1930, Nueva York, Holmes.
Federico, G. and Tena-Junguito, A. (2016): “World trade, 1800-1938: a new data-set”, European Historical Economics Society, Working Paper 93.




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