The Group of Twenty (G20) meeting to be held next week in Buenos Aires could mean more than traffic and safety issues. At least for the agro.
The context in which the summit of developed and developing countries will take place can not be more complex. The effects of the trade confrontation between the United States and China, the main economies of the globe, have had consequences that have not yet ended. In principle, it has altered the soy trade as China responded to US measures, raising US grain import tariffs. and affected exports by $ 14 billion.
For several weeks in the Chicago market, all the rumors or news of a possible negotiation between Washington and Beijing served as a bullish argument for the quotes. So far, there has been more speculation than data. Now, the focus will be the meeting between US President Donald Trump and his Chinese colleague Xi Jinping in Buenos Aires. Both are needed, but at the same time, they do not seem willing to budge.
This dispute between giants was not in the plans of those who believed the demand for Chinese soybeans would be infinite. One of the derivations of the trade war was that China announced its intention to start replacing soybeans with other grains that make it possible to turn vegetable protein into animal. For now, it will be on a small scale, but it is the first time that a change in a trend that seems irreversible is glimpsed.
Another consequence is that China will seek more soy in South America. First, Brazil was favored that it did not suffer the drought that affected Argentina. For the current cycle, Brazil foresees at least a harvest of 120 million tons, although some have already estimated that they will reach 137 million tons. Bean exports would reach 80 million tonnes, of which 80% would go to China. But politics has already begun to make noise. Brazil's President-elect Jair Bolsonaro has criticized Chinese investments in his country. Once again the alarms of protectionism have sounded to such an extent that Brazil's current Minister of Agriculture, Blairo Maggi, had to clarify that the future president does not intend to affect trade.
The pyrotechnics of Bolsonaro's statements will have a limit on the realism of his country's strategic interests. And agriculture is one of them. He confirmed this with the appointment of the rural bench coordinator, Tereza Cristina, as the next Minister of Agriculture. For Argentina, the question of the fate of Mercosur opens up. The future occupants of the Planalto Palace have already said that the regional bloc is not a priority. Strictly speaking, this means that they will renegotiate the terms of the customs union and seek agreements between countries. At this level of realism, it is unlikely that Brazil will suspend Mercosur's tariff preference over Argentine wheat. Bolsonaro is not going to the G20, but his arrival in Brasilia will also have consequences in international trade.
The other scenario that could bring something new in the G20 will be the bilateral meetings. In the case of Argentina, the support that Trump gave the Macri administration in the agreement with the IMF could be extended to the commercial sector. The highest expectations are placed in the long-awaited opening of the beef market – there are no excuses to keep it closed – and some additional definition on biodiesel after the announcement by the Commerce Department on the review of measures against biofuels of Argentine origin.
In formal terms, the G20 will confirm the document signed last July by the Ministers of Agriculture in Buenos Aires, where there is a clear recognition of scientific and technological evidence in agricultural production. Argentina influenced the adoption of this criterion in the declaration. It is a precedent to take into account, especially in relation to some governments of European Union countries in which an old vision persists on agricultural production and the trade of food.