Argentina wheat crop crisis raises alarm bells in Brazil

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This week, how droughts in Argentina could disrupt Brazil’s wheat supply. The presidential election in Bolivia. 

Poor wheat harvest in Argentina spells trouble for Brazil

Extreme climate conditions are set to cause wheat production to crash in Argentina — especially in the Nucleo region, the largest area of production in the country.

A <a href="">new report</a>, published by the Rosario Commodities Stock Exchange, shows that the upcoming harvest may amount to 4.4 million tons, significantly lower than early estimates of 7 million tons.</p> <p><strong>What happened in Argentina?</strong> Droughts have been affecting the area for six months now, reducing planted area by 10 percent to 1.6 million hectares. Furthermore, many crops were hit by frosts, which lowered grain quality. In hardest-hit areas in Argentina, Santa Fé and Córdoba, yields are estimated at 2.34 and 2.4 tons per hectare, respectively.</p> <ul><li>A year ago, those yields were 1.6 and 1.4 tons larger, respectively.</li></ul> <p><strong>Rainfall.</strong> Meteorologists expect moderate to heavy rains in the region between October 19 and 21, though it may not be enough to recover soil moisture in places such as Córdoda.</p> <p><strong>Why it matters.</strong> Wheat is Brazil&#8217;s biggest agricultural import, and 80 percent of it comes from Argentina.</p> <ul><li>Brazil’s National Supply Company (Conab) estimates the country will produce 6.8 million tons of wheat in 2020-2021, but demand is nearly twice as big. Meanwhile, wheat reserves are slim, after a poor 2019 harvest.</li><li>Moreover, the same droughts observed in Argentina are also affecting wheat crops in Brazil&#8217;s southernmost state of Rio Grande do Sul. The dry weather is speeding up the maturation of grains and, therefore, lowering yields.</li></ul> <p><strong>Economy.</strong> The disruption of the harvest in Argentina could spark a rise in prices of wheat-based products in Brazil, and food inflation is something that has <a href="">concerned the government</a> of late, as it has a disproportionate effect on poorer populations — the demographics President Bolsonaro wants to get onside. After a massive increase in rice prices, Brazil zeroed all import fees for corn and soy until Q1 2021, in an attempt to contain any further price bumps.</p> <hr class="wp-block-separator"/> <h2>Left set to win in Bolivia —&nbsp;but political stability remains uncertain</h2> <p>Bolivia went to the polls on Sunday expecting to <a href="">turn the page on a 12-month cycle of political instability</a>. Early results suggest a landslide first-round victory for Luis Arce, of former President Evo Morales&#8217;s Movement for Socialism (MAS) party, with over 52 percent of votes. But the aftermath of the election will be as important as the vote itself in determining Bolivia&#8217;s political future. First, a timeline of Bolivia&#8217;s recent democratic turbulence:</p> <ul><li><strong>2016-2017.</strong> Evo Morales supporters called for a referendum to amend the Constitution and allow the president to run for a fourth consecutive term. While the people voted against the amendment, Mr. Morales ignored the result and stood anyway, backed up by the Supreme Court, which ruled that his human rights would be violated otherwise.</li><li><strong>2019.</strong> After a controversial vote count process resulted in a first-round win for Mr. Morales, the opposition called foul play. Observers from the Organization of American States issued a report — which has now been brought into question — endorsing claims of voter fraud. Weeks of often violent protests followed, and <a href="">Army leaders muscled Mr. Morales out of the presidency</a>, causing him to flee to Mexico. Jeanine Áñez, who was serving as the second deputy to Bolivia’s Senate President, proclaimed herself the new head of state.</li><li><strong>2020.</strong> A study by independent researchers <a href="">concluded that the OAS&#8217;s analysis was flawed</a>, and undermined fraud accusations against Mr. Morales and his party. Still, the Bolivian right wing <a href="">tried to completely bar MAS from the 2020 election</a>.</li></ul> <p><strong>What now?</strong> Bolivia is beginning a tense and potentially long vote count, sparking doubts about whether stakeholders will accept the results peacefully. AP reports that, six hours after polls closed, barely 3 percent of ballot boxes had been counted. Other elements add to the intrigue:</p> <ul><li>Two exit polls were not made public after pollsters said they doubted their own data.</li><li>Late on Saturday, the country&#8217;s Supreme Electoral Court pulled a curveball and decided against the reporting of real-time preliminary results — saying it wants to avoid a 2019-like scenario.</li><li>Bolivia has not had a peaceful transition of power since 2002. President Áñez has congratulated Mr. Arce on his victory, which gives some hope that the vote will be respected. But Luis Arce will have to display a lot of savvy to work with ruling forces.</li></ul> <p><strong>Populism.</strong> One of Mr. Arce&#8217;s main challenges as president will be to break with MAS&#8217; reliance on the charismatic leadership of Evo Morales&nbsp;—&nbsp;who led a prosperous cycle in the country, but succumbed to the temptation of perpetuating himself in power.</p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>The Q3 earnings season is upon us, and homebuilders are poised for good results. Real estate companies MRV and Tenda&nbsp;—&nbsp;which focuses on the low-income segment — reported a strong growth of both launches and sales, largely thanks to federally-subsidized housing programs. According to analysts from brokerage firm XP, other players are also observing a bounceback in sales, as Brazilians abandon social isolation.</p> <hr class="wp-block-separator"/> <h2>Health regulator getting smaller and smaller</h2> <p>In his recent tell-all book, former Health Minister Luiz Henrique Mandetta said that the National Sanitary Surveillance Agency (Anvisa) is unable to perform its duties because of a lack of manpower. Successive administrations have chosen not to enhance the number of servants, with Mr. Mandetta saying that without enough staff to screen people and products entering the country, &#8220;Brazil&#8217;s borders are practically open.&#8221; With 1,297 employees today, Anvisa has 33 percent fewer members of staff than in 2008.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/4060527" data-url="" aria-label=""><script src=""></script></div> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <ul><li><strong>Fiscal balance. </strong>The lower house wants to pass a plan to address the financial crisis experienced by states and municipalities before the end of the year. In exchange for federal aid, governors and mayors will be required to commit to austerity measures. The bill had been presented in April, but was left dormant during the pandemic. &#8220;Now, it is time for a new stage in the process of getting states and cities back on track,&#8221; said Congressman Pedro Paulo, the rapporteur of the plan.&nbsp;</li><li><strong>U.S.-Brazil. </strong>Robert C. O&#8217;Brien, head of the U.S. National Security Council, is in Brazil for a mission to &#8220;highlight the robust relationship between [Brazil and the U.S.].&#8221; He is accompanied by representatives of the Export-Import Bank of the United States, the office of the U.S. Trade Representative, and the U.S. International Development Finance Corporation. Mr. O&#8217;Brien may meet with President Jair Bolsonaro today, though this has not been confirmed by either side.</li><li><strong>Earnings season.</strong> Markets will follow the release of mining giant Vale&#8217;s Q3 production report after trading hours today. On Tuesday, it will be Petrobras&#8217;s turn. The oil and gas firm has recently postponed plans for a new oil platform in the deepwater Campos Basin from 2023 to 2024. Analysts see the move as an indication that not even Petrobras&#8217;s prized pre-salt oil reserves will be immune to divestments as a result of the pandemic.</li><li><strong>Chile protests.</strong> Chileans are set to vote in a historic referendum next weekend, to decide whether to reformulate the country&#8217;s constitution, which dates back to the dictatorship of Augusto Pinochet. On Sunday, demonstrators celebrated the one-year anniversary of the 2019 protests, which forced the government to call the vote — but rallies turned violent, with police precincts and churches being firebombed.&nbsp;</li></ul> <hr class="wp-block-separator"/> <h2>In case you missed it</h2> <ul><li><strong>Biden. </strong>Our Brasília correspondent Débora Álvares revealed last week that, should former U.S. Vice President Joe Biden confirm his polling numbers and win the presidential election, Brazil&#8217;s Jair Bolsonaro could make changes to his cabinet in response. The president&#8217;s allies will use the U.S. election as a pretext for something they have wanted to do for months: <a href="">get rid of Foreign Minister Ernesto Araújo</a>.</li><li><strong>Vaccine. </strong>The Brazilian Health Ministry presented its 2021 National Immunizations Program on Thursday, which forecasts distributing a <a href="">coronavirus vaccine</a> as early as January 2021. While four potential vaccines are being tested in Brazil, only one — being developed by the University of Oxford and British-Swedish pharmaceutical company AstraZeneca — made it onto the national vaccine calendar. São Paulo Governor João Doria, who is in a bitter feud with President Bolsonaro, demanded an explanation for the non-inclusion of the CoronaVac, being developed by a Chinese lab in partnership with the São Paulo state government.</li><li><strong>Trade.</strong> Despite Jair Bolsonaro&#8217;s constant pandering to U.S. President Donald Trump, bilateral trade with the U.S. has just seen its <a href="">worst result in 11 years</a>. Between January and September of this year, accumulated trade between the two countries hit USD 33.4 billion, a 25 percent drop from the same period in 2019. </li><li><strong>Corruption.</strong> Just days after President Jair Bolsonaro stated that he had ended Operation Car Wash due to there being “no more corruption within the government,” his administration was rattled by an awkward — and frankly disgusting — scandal. Senator Chico Rodrigues of Roraima, the government’s former deputy whip in the Senate, was targeted by a Federal Police investigation into the embezzlement of BRL 15 million earmarked for the fight against Covid-19. The Feds found thousands of dollars stashed &#8220;between his buttocks,&#8221; making the senator an instant punchline. However, the case is set to <a href="">put the Supreme Court and Congress on a collision course</a>.

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