Latin American scholars have a long history of applying political economy frameworks to analyze our natural resource industries.
Most of this work has focused on how oil and mining have shaped power relations in the region. But until now, few books have tackled the soybean boom and its interplay with civil society in South America.
At first glance, soybeans would sound as bland a topic as their taste would suggest. Why are soybeans important? How is it possible that a seemingly obscure crop could engineer important power dynamics in complex societies such as Argentina or Brazil?
In Mariano Turzi’s unfortunately titled The Political Economy of Agricultural Booms: Managing Soybean Production in Argentina, Brazil and Paraguay, the author attempts to explain why.
In it, he makes a compelling case that the soybean boom is just as important as previous natural resource booms in reinforcing pre-existing power structures in the three countries, but that unlike other booms, it involves a complex interplay between international agricultural R&D conglomerates, local politicians, landowners, environmentalists, and trading companies. (The title is unfortunate because the book is not about “management” at all).
The protagonists of his story are corporate actors: the owners of “genetically modified seeds with proprietary traits” and the grain traders that sell the commodities to hungry international markets. In the middle, Latin American civil society—whether it is Paraguayan peasants, Brazilian environmentalists, or Argentine landowners—is engaged in a battle for rents that has starkly different outcomes in each of the three countries.
Turzi’s first line of business is convincing us that soybeans matter.
He does this by painting it as an almost magical food: high in protein content, with a wide variety of uses in food and feed. Soybeans make beef, chicken and pork much cheaper than they otherwise would be. The sharp price rises we have witnessed in the last few years have meant large profits for Argentina, Brazil and Paraguay.
The political economy of any boom is usually about the distribution of extraordinary windfall rents. In his book, Turzi makes the case that the source of the rents in soybean production lies in technological advantage. The power of seed developers such as Monsanto comes from genetically modifying seeds to make them resistant to pesticides and dramatically increase crop yields.
The struggle for these rents has shaped important political outcomes in each of the three countries. But the outcomes have been vastly different.
In Brazil, local governments and seed companies have cooperated. In Paraguay, seed companies and traders have effectively colonized the country’s agricultural sector. In Argentina, the struggle for the profits of modified seed technology has generated intense conflict.
Brazil’s story focuses on the fight, early in the administration of Luiz Inacio Lula da Silva, between Environment Minister Marina Silva and the biotech companies. The issue was whether or not GMO seeds would be allowed in Brazil. In the end, the pro-growth interests of Lula’s government won, and biotech companies found an increasingly hospitable environment in which to work in.
Yet as much as the federal government created favorable conditions for agricultural interests, local governments still held considerable sway. It is difficult to overstate the importance of agricultural governors and their power in the Brazilian Parliament. This meant that local governments could create favorable conditions for agriculture at both the federal and the local level.
Soya-producing states enacted legislation favoring the industry. Through their representatives in Congress, the “bancada ruralista”, they nullified policy proposals opposing or limiting the adoption of genetically-modified seeds. The only remaining issue, then, was how multinationals and local interests should divide the spoils from the boom. The result was less conflict, more cooperation.
In the end, a cozy relationship between big agro and local politicians ensued, and the only substantial conflict was over how to distribute the large rents. Environmental concerns or the plight of the landless took a back seat to the drive to appease big agricultural interests.
The history of Paraguay illustrates a different outcome.
Because of a long tradition of strongmen, Paraguay has few landed rural elites. Most of the land belongs to foreign interests, and they have effectively allowed multinational corporations to “colonize” agriculture in the country. Because of the concentration of production in extra-national capital and the government’s relative poverty, Paraguay has few resources to develop a local R&D industry. The country ends up being a case of multinationals aggressively controlling the state for their corporate production and profits.
In Argentina, the soybean producers are the adversaries of the labor/industrial/urban coalition that represents Peronism. Land issues are of minor importance, so the conflict is between rural and urban dwellers.
This conflict has deep historical roots. Argentine politics have been marked by the struggle for dominance between Buenos Aires and the provinces. This conflict precedes the country itself; since Buenos Aires was the only port and customs agency during colonial times, it has always been at odds with the interior, much of which produced the wealth from which Buenos Aires profited.
The main source of power for the traditional Peronist movement has been joining together with labor, industrial, and urban populations in Buenos Aires to extract rents from the more productive rural agricultural agents. Political survival in the Kirchner’s Argentina (2003-2015) depended on taxing agriculture in order to support industry. Because the taxes levied on soybean producers did not have to be distributed to state governors according to Constitutional norms, the wealth soya exports created provided a grand opportunity for political patronage and exercising power.
Turzi’s book is very well documented, and his story is engaging. But as new as the story is, the feeling that we have seen this movie before is difficult to shake.
Brazil, Argentina and Paraguay account for an astonishing 76% of world exports of soybean meal and 68% of exports of soybean oil. However, their exports of seeds are small. Like with previous natural resource booms, the source of these riches—the technological advances contained in the seeds—remains out of reach.
Although Tunzi provides no real measurement of the rents involved in the industry, it is fair to say that little to none of the knowledge and innovation behind the soybean boom happens in Latin America. His concern about the topic is highlighted when he says:
“Is the soybean boom a re-enactment of the traditional Latin American model of international economic integration as commodity exporter? Should this explanation be the case, the perils that have historically come with this model—international price volatility leading to domestic boom and bust cycles, excessive commodity dependence, and economic enclave features—would still be present dangers.”
This is the key question, and he thinks the answer is yes.
In his book The Quest for Prosperity, the Chinese economist Justin Yi-Fu Lin details how agricultural surpluses served as the basis for industrial upgrading in East and Southeast Asia. The lesson for Latin American policymakers should not be so much how to capture the rents of soybeans, but what to do with them.
Unless Latin American societies manage to forge a consensus on how to channel extraordinary booms such as the soybean boom in Argentina, Brazil, and Paraguay into industrial upgrading, innovation, and knowledge—including in the soya industry—we will keep writing the same books describing how extraordinary rents are captured by one group or another. Whether it is soybeans, lithium, or any of the resources that will account for future booms, it is about time our policymakers learn the lessons from the past and stop repeating them.