Reimagining Argentina's agriculture sector

Argentina is the world's third largest food exporter, with the agricultural sector accounting for 15.7% of gross domestic product (GDP) and 10.6% of tax revenues in 2021. However, in recent years the country has been losing market share in international markets, which raises concerns about the sector's competitiveness. 

"Maintaining the global competitiveness of Argentina's agri-food sector is key to invest in the country's economic sustainability," said Irene Wasilevsky, an agricultural specialist at the World Bank and co-author of the report "Towards a More Competitive, Inclusive and Resilient Agricultural Sector." "With a predictable policy environment, the agri-food sector can generate shared benefits for provinces, consumers, producers and the environment," she added.

The report identifies three key areas to boost recovery, bolster food security, and promote sustainability: 

1. Supporting family farming

2. Developing a stable regulatory framework

3. Enhancing resilience and accelerating technological innovation

1. Supporting family farming

The context: Argentina has 334,000 farms of which 251,000 or three-quarters are family-owned. Family farms provide about half of the food consumed locally while also contributing to the country's exports. In 2021, their exports amount US$10.8 billion.  

However, 172,000 of these family farms do not have enough resources – land or capital – to make a living from their production, and depend on other sources of income.   About one-third of the rural population, indigenous peoples in particular, have unmet basic needs, with inadequate access to education, health care, internet, and even telephony.

Family farms are less resilient to climate change risks and macroeconomic context. Partly because of these reasons, the number of family farms declined by around 40 percent between 1988 and 2018. 

Differentiated strategies: To safeguard family farmers, the report prioritizes creating tailored strategies to support their specific needs.  

• Provide social protection programs, health services, education and training, as well as diversify work opportunities to support subsistence producers.

• Promote horizontal and vertical integration in value chains, as well as access to financing, for producers ready to transition to commercial production.  

• Promote the role of women in the sector's workforce and support their technical capacities in production, management and marketing.

2. Developing a stable regulatory framework for the sector

The context:The analysis finds that the country's poor performance in agri-food production and exports relative to its potential can be attributed to policies that have heavily taxed and constrained the sector.

In 2021, Argentina ranked second among countries with the highest rate of tax collection from export duties (2.1 percent of GDP).

Public investment amount to a lesser amount of the income the sector contributes through taxes. For example, between 2019 and 2021, the sector contributed US$8,700 million more than the investments it received, representing 2.12% of GDP.  

Realigning incentives:The report says that realigning agricultural incentives and allowing producers to have greater predictability in their business development, can help reduce economic vulnerability in the long term.  

While reducing taxes is critical for sustainable development, restoring broad-based fiscal sustainability is an urgent need to achieve sustained growth for the entire economyes. 

The report recommends moving forward with the phase-out of export taxes and a sub-national substitution of the turnover tax on primary activities with less distortionary taxes at the sub-national level, among other measures to incentivize producers to invest in more advanced, environmentally sustainable technologies. 

3. Enhancing resilience and accelerating technological innovation  

The context: Argentina's competitiveness in food production and exports is underpinned by both its natural resource wealth and its investment in innovation. Today, however, this model is in jeopardy. 

The innovation ecosystem has supported technology-driven productivity growth, which has increased resource efficiency.  

Since 1990, Argentina has reduced GHG emissions per unit of product by one-third, thanks to the adoption of sustainable intensification practices, especially in cereals and oilseed production. A key feature has been the widespread incorporation of no-tillage practices, with direct sowing currently covering 90 percent of areas cultivated with grains.

However, more frequent droughts and floods make essential to improve the sector's resilience to climate change. Today, dwindling public funding is threatening innovations for the common good that are central to competitiveness.

Good practices and investment in innovation: Vulnerability to climate-induced damage can be reduced through the widespread adoption of climate-smart good agricultural practices, which can improve soil management, water storage, and forest cover.

The report indicates the importance of sustaining a public innovation system to provide solutions that private innovation does not cover, such as the continuous generation of information, an updated regulatory system and access for small agricultural producers who do not benefit from private sector developments. 

Finally, Argentina will be able to take advantage of options to tap into global carbon finance markets to pay for global public goods such as GHG reduction.

By implementing these measures, Argentina can revitalize its agricultural sector as an engine of economic growth and sustainable development.