ARGENTINE AGRO-EXPORT MODEL: ORIGIN, CAUSES, CHARACTERISTICS - ECONOMY - 2025

The Argentine agro-export model is a system that is based on the production of agricultural raw materials with the main purpose of being exported to other countries. This model is related to countries that are highly competitive in the production of primary sector goods, such as Argentina.

The model carries a particular role within the agreement of nations, which implies specializing in these products and importing other goods corresponding to the secondary sector.

This kind of circumstance originated that there had been several attempts to change this structure, by which it was tried to substitute locally in some way many of the products that were imported.

In this sense, very little progress was achieved, being able to only add a little more value to the local production related to clothing and food.

This system is related to the global segmentation that existed between peripheral countries and central countries. The peripheral countries elaborated and exported raw materials, essentially agricultural. On the other hand, the power plants were devoted to manufacturing manufactured products at a higher price.

Effects in Argentina

This model was born in the middle of the 19th century in Argentina and Latin America. It was a direct consequence of the almost unlimited access to foreign investment and capital, which allowed Argentina to revive the economy in much of its territory.

This economic model was operational for more than 50 years, due to the flow of capital between the least developed countries and the most powerful.

However, during the 1930 crisis, countries such as France, the United States, and Great Britain plunged into a severe economic depression, which slowed the flow of investment to the so-called peripheral nations.

Therefore, nations like Argentina had to change the agro-export model for one more focused on domestic consumption, placing all regional production in the local market.

However, the agro-export model in the course of its existence made it possible for Argentina to grow, even if it did not develop, making this nation known as the breadbasket of the world.

Origin

The nineteenth century represented a momentous stage in the economic history of humanity, as it was the arrival of a new era where industrialization not only consolidated in its British birthplace, but also spread to other countries.

However, the populations of some countries outside of Europe were also able to earn high incomes, albeit with low levels of industrialization. These countries had recently been colonized by Europe, such as Canada, Argentina, Uruguay, and Australia.

The export-led models of these countries were based on the strong integration and complementarity of their economies with European countries, which were at a more advanced stage in their industrialization process, especially Great Britain.

Its economic growth was based on the rapid expansion of the export of products from the primary sector and on the effects of these exports linked to other economic activities.

Export expansion

These countries, which had recently been colonized by Europe, exported primary products to the more developed European nations, taking advantage of their abundant natural resources, particularly the land.

In return, they imported from these European countries factors of production, such as labor and capital, as well as manufactured products.

Other countries, mainly in tropical areas, including most Latin American countries, also tried to stimulate their growth by expanding their exports.

However, the results were more modest than those of the colonized countries, due to the much slower pace of export growth and the weak linkages of their exports with the rest of the economy, two essential elements of the model.

Causes

The framework within which the export-led growth experiences developed was established by the ever-increasing international integration that began in the first half of the 19th century, known as the First Globalization.

During the second half of the 19th century, the Argentine economy was fully incorporated into the world market as a supplier of raw materials of agricultural origin, achieving quite high growth rates.

Until the First World War, the annual growth rate of trade was very fast, being 3.9% from 1818 to 1865 and 3.1% from 1866 to 1913.

This development was accompanied by an increase in the demand for labor, covered mainly through immigration.

On the other hand, during this period, increases or reductions in tariffs did not have an eloquent effect on Argentine exports as a whole.

Growth factors

In order for there to be such a rapid growth in exports, not only the progress of the Argentine economy, but also the increase in external demand, were fundamental elements.

The growth in trade was driven by a number of factors, such as the industrialization process itself, which shifted the demand and supply curves to the right, due to technical changes, the fall in transport costs and the process of trade liberalization experienced by the Atlantic economies.

Due to the same causes, trade in agricultural products also rose steadily until the First World War began. This was the situation in Argentina at this time.

Countries specializing in the production and export of primary sector products, with a high demand from Northwest Europe due both to rapid population growth resulting from the demographic transition and to the increase in per capita income of their population, achieved rapid economic growth.

Characteristics of the agro-export model

Agricultural production

The production destined for the central countries was produced in the extensive rural areas of the Argentine pampas region, called latifundios.

Subordination to the foreign market

The factor that Argentina was a peripheral nation in the capitalist economy made it easier for advanced European countries to have immense decision-making power over the economy of this country.

Prices were determined in Europe, in addition to deciding where investments would go, thus defining the extent and form of production in peripheral nations. This economic subordination caused that for many years Argentina did not develop its industry.

Importance of foreign capital

Investments from the central economies were very important for the development of the agro-export model. Its main objective was to improve transportation facilities and increase the marketing of products on the world market.

Investments came mainly from Great Britain, which was the country responsible for the expansion of the railway system and the modernization of the port of Buenos Aires. In addition, banks and large refrigerators were created to facilitate the export of quality products to Europe.

Role of the State

The demand for Argentine agricultural goods was not a sufficient condition for production to grow and be sustained over time.

In this sense, the State was required to participate so that the operation of the agro-export model would work and guarantee the transit of products throughout the country.

In addition, the transportation system was expanded, especially the railroad, and foreign immigration was encouraged in order to increase the fitness of the workforce.

Consequences

Agricultural exports

The quantity and cost of agricultural products depended on the external market, which was conditioned by economic crises or booms in the most important European countries.

This limited the development of the country and brought social consequences that have repercussions to this day. Furthermore, the emergence of the meat processing industry gave rise to a preference for the export of frozen and chilled meats, rather than live animals.

External indebtedness

External debt is an essential component of the growth of the agro-export economy. Argentina got into debt through hard-to-pay loans, which increased fiscal problems.

The requirements to access these credits and develop the Argentine economy ended up becoming the biggest obstacle to the country's development.

A country in imbalance

The agro-export model was largely responsible for the regional imbalance suffered by Argentina.

This was due to the fact that Buenos Aires centralized the port, locating the strongest economic groups there. On the other hand, the workers were located in the pampas region.

Thus, the areas of Argentina that did not supply the world market were dedicated to satisfying the demand of the Pampas and Buenos Aires regions, such as Mendoza with wine and Tucumán with sugar.

Immigration

In the mid-19th century, Argentina did not have enough manpower to explore the lands. The natural growth of the population meant waiting too long, so the solution was to incorporate thousands of foreigners.

Until 1914, more than three million people entered the port of Buenos Aires, and the vast majority settled in the fields of the pampas.

Advantage

Taking advantage of comparative advantages

According to comparative advantages, a region must produce the goods for which it is best available due to its natural conditions.

For this reason, it would be foolish to try to produce anything else, because this would lead to being uncompetitive with respect to the regions naturally prepared for it.

If a nation is effectively prepared to produce primary sector goods, it should specialize in it.

Taking assessments of world trade, Argentine exports totaled 0.7% of world trade in the mid-19th century, reaching 3.8% in the 20s of the 20th century.

Great demand for food

It is important to take into account that in the future there will be a great demand for food as a result of the increase in the world population that can be seen, as well as the existence of better food conditions.

What was long viewed as an undesirable proposition by some could now be a great opportunity.

Disadvantages

Low value added products

Many consider the agro-export model as an undesirable condition because it focuses on an industry with low added value.

This resulted in a series of political decisions being taken to change this condition.

Dependence on other countries

The Argentine agro-export model was based on external demand. With the decline in demand in 1930, imports fell dramatically and the country had to rethink how to replace imports.

For example, Great Britain and Argentina had a business relationship dating back to colonial times. The agreement was simple: Argentina produced raw materials and Great Britain sold the manufactured goods.

However, the First World War put an end to this exchange and highlighted the difficulties and limitations of the agro-export model.

Argentina declared itself neutral during the war, but suffered the consequences anyway. Customs revenues fell dramatically and the absence of imported products began to be felt.

President Victorino De La Plaza made an attempt to substitute imports, which was not adequate to change the agro-export environment of the nation.

In the middle of the war, Great Britain had to give priority to its domestic market over the needs of foreign countries.

End

Economic depression

Unemployment Office in the Great Depression

The world economic crisis began in 1930, with its core in the US The sharp decline in Wall Street stocks caused the Gross Domestic Product to drop 25%, while unemployment was also 25%.

This economic collapse quickly spread to the rest of the world and the different countries were closing their economies and dedicated themselves to producing mainly for their domestic market.

This crisis caused Argentina to be astonishingly affected, due to its great dependence on the international market. At that time, the value of exports decreased by 50%, with the consequent drop in foreign exchange earnings.

Perks system

During that period, they went through a system of perks where entrepreneurs required a package of improvements to be able to settle. It really wasn't a competitive industry, because it was sustained by protections.

Everything began to be damaged when the government began to want to decide what should be produced. In 1930 an institutional break was generated, where the paternalism and irresponsibility that were underlying at that time prevailed.

The State began to say we produce this and protect it, without realizing that when you protect one, you unprotect the next person.

Change of model

For all this, Argentina needed to replace the economic model to go from exporting agricultural products to the so-called import substitution model.

This new model implied that the agricultural sector fell and the industrial sector developed, absorbing the unemployed into the agricultural economy.

This caused that, from 1930 to 1970, the volume of tons produced by Argentine agriculture was always the same: 20 million. Although development did not take place, there was an increasing social mobility.

References

1. Lifepersona (2019). The Agroexport Model: Characteristics and Consequences. Taken from: lifepersona.com.
2. Vicente Pinilla (2017). Why did Argentina become a super-exporter of agricultural and food products during the Belle Époque (1880-1929)? European Historical Economics Society. Taken from: ehes.org.
3. Definition MX (2014). Agro-exporter model. Taken from: definicion.mx.
4. Cecilia Bembibre (2010). Definition of the agro-export model. Definition ABC. Taken from: definicionabc.com.
5. Mora Institute (2019). The labor market in the agro-export model in Argentina: the role of immigration. Taken from: alhe.mora.edu.mx.
6. Diego Cabot (2018). When did we lose our way? Argentina and its productive model. The nation. Taken from: lanacion.com.ar.