Argentina pledges help to ease global food and energy shortages

Argentina pledges help to ease global food and energy shortages

Argentina, a natural resource powerhouse, has pledged to help ease global food and energy shortages by boosting oil and gas production and incentivising exports of grain from the country, according to economy minister Sergio Massa.

Speaking on the first day of a visit to the US, during which major new lithium mining and energy investments are expected, Massa told the Financial Times that he was also committed to stabilising the South American nation’s troubled finances and rebuilding hard currency reserves.

“We are going to contribute to the global food and fuel security agenda by increasing our production of energy and proteins,” Massa said. During a meeting on Tuesday at the US state department, an Argentine official said the minister had stressed that his nation could help “feed and fuel the world”.

The US has been searching the world for friendly nations that can increase food and fuel production to help alleviate shortages created by the Russian invasion of Ukraine and subsequent western sanctions on Moscow. As a democratic ally enjoying abundant natural resources and good relations with Washington, Argentina is well placed to help.

Exchange controls and high taxes imposed previously by the ruling Peronist coalition had deterred foreign investment but Massa, a seasoned politician appointed last month to head a “super ministry” combining the economy, manufacturing and agriculture, is moving quickly to remove some of the hurdles.

Measures to incentivise soy farmers and energy companies to boost production have been announced and incentives for mining are promised soon.

“As well as a healthy relationship with multilateral organisations, we want to move to a higher level of investment of US companies in the real economy,” Massa said. “We are going to promote a rule which grows and rewards bigger investment in mining.”

Argentina is a major producer of lithium, a key metal for electric batteries, and officials said a significant new investment in this area by an international mining company would be announced this week.

In a signal of improved relations with international organisations, the Washington-based Inter-American Development Bank (IDB) agreed on Tuesday to boost its loans to Argentina to a total of $5bn for 2022 and 2023 combined, including $3.7bn in new funds.

Argentina is the world’s biggest exporter of soyabean meal and oil and the second-biggest exporter of corn, but farmers have been holding back from selling their crops because of exchange controls that give them an artificially low rate. Before leaving for Washington, Massa announced a temporary boost to the exchange rate used for soya exports.

It forms part of a package that also includes incentives for soy farmers to invest and increase production. The Rosario Board of Trade, an agricultural market, predicted on Monday that Argentina would enjoy bumper soy and corn harvests this season and will export a record $42.3bn of grains and grain products in 2022-23, up $1.3bn on the previous year.

Massa hopes that his special soy export exchange rate, running until the end of the month, will bring in an extra $5bn in exports and allow him to resist pressure for a big devaluation. The black market exchange rate, which had soared as high as 333 pesos per dollar on July 21, has fallen back as devaluation fears eased. It was trading on Tuesday at around 268 pesos — still far above the officially controlled level of 144 pesos.

The leader of a splinter group within the ruling Peronist coalition and a possible presidential candidate next year, Massa faces serious economic challenges. Inflation is heading for 90 per cent this year, the government is struggling to fund itself, and net international reserves are precariously low.

“The pillars of the stabilisation programme are fiscal discipline, reserve accumulation and inclusive development,” Massa said.

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Massa believes his political power base gives him an advantage over Martin Guzmán, an economist and technocrat who quit as economy minister on July 2 after struggling to implement unpopular austerity measures. His replacement, Silvina Batakis, lasted barely a month before she was fired during an official trip to Washington.

It is unclear whether Massa will be able to overcome deep divisions on economic policy within the Peronist coalition. Cristina Fernández de Kirchner, the powerful vice-president who narrowly escaped an assassination attempt on September 1, leads an influential faction strongly resisting spending cuts ahead of elections next year.