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Wednesday, April 23, 2008

Good news from Argentina

According to the Cato Institute's blog, a federal court in Argentina just decriminalized the personal consumption of drugs. I can't read the original source article the blog links to, but this sounds like great news.

The court ruled that the punishment of drug users “creates an avalanche of cases targeting consumers without climbing up in the ladder of [drug] trafficking.” Indeed.

Meanwhile, in Venezuela, "Government-set prices have hardly risen since they were introduced in 2003, leading many producers, who are unable to operate at a profit, to close down plants and reduce production levels. This drop in production has led to shortages of many basic food products including milk, eggs, meat, chicken and wheat flour."

Here's a picture of where price controls on food inevitably lead:


Good job, Hugo!

Posted by Terrence Watson on April 23, 2008 in International Politics | Permalink


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Excellent post, Terrence – but don’t be too quick to applaud Argentina.

Their drug law reforms sound great, but they have also taken a misguided approach to food policy.

The Argentine government has introduced food export taxes that have caused massive protests among farmers. This move will destroy foreign investment in agriculture in Argentina.


Posted by: Matthew Johnston | 2008-04-23 2:21:08 PM

Thanks, Matthew. Here's one thing I wonder about the introduction of the export taxes in Argentina:

"Fernandez introduced the variable tax rate on exports partly as a way to prompt farmers to grow a variety of crops, not just soybeans."

what I wonder is why the farmers are only growing soybeans in the first place. They're obviously sending most of them abroad (otherwise, what good is the tax?)

My uninformed guess is that it has something to do with the subsidization of corn and other crops in the rest of the world.

Ah, here we go:

U.S. farmers are going to devote more acreage to soy bean production this year.
"Soybean producers told the government they would plant 74.8 million acres, up 18 percent from last year and just below the record high in 2006. Corn growers said they would plant 86 million acres, down 8 percent from 2007."

So, if I'm understanding this, ethanol subsidies for corn drove down the amount of acreage American farmers were devoting to soybeans, and Argentina farmers picked up the slack.

Now American farmers are going to go back to soybeans, and Argentina is going to slap its farmers with an export tax (which isn't going to do much good if the American farmers are going back to soybeans anyway.)

Ah, man, those poor farmers. They're going to get screwed!


Posted by: Terrence Watson | 2008-04-23 2:36:32 PM

So it came down to economics. Some bean counter finally convinced the powers that the price of chasing boogie men was too high. It's about time someone caught on.

Why can't Canada adopt a "hybrid" policy? Let's start with marijuana and see how much money we save. With all that cash we could likely deal with the more dangerous substances more effectively.

Posted by: dp | 2008-04-23 2:39:38 PM

Now there's a lesson in unintended consequences, Terrence!

It would be great if every nation grew what it grows best and traded freely with every other nation. That would maximize global food production, and drive prices down for everyone.

Argentina is making a mistake with its food export tariffs, but it's not hard to understand their concerns.

When Saskatchewan farmers start growing coconuts you'll know the food crisis, and the protectionist reaction to it, has hit its peak.

Posted by: Matthew Johnston | 2008-04-23 2:53:44 PM

Yes ... unintended consequences ! This reminds me of a business trip to Argentina in 1981. The plane stopped in Rio de Janeiro and an elderly couple sat down beside me. He was in his 70's and asked where I was going , and when I said Buenos Aires he laughed and asked me if I was afraid of being shot (The Falklands / Malvenas War was just over). I said no and we had a very interesting conversation during which I asked him how one protects ones investments with 300% yearly inflation (1981).

He had a wine business. He described in a round-about way how his son who lived in New York opened a wine importing business , and the father exported all his assets out in legal bottles of wine to New York ... and sadly the New York business eventually declared bankruptcy. Obviously the son , assuming he had his father's interests at heart , had taken a huge , but legal salary while selling the wine , and put most of the money in a US bank.

The moral of any sort of currency controls are impervious to those with finances , but the poor suffer.

Oh and a few days before I left the IMF helped to devalue the Peso by 10,0000 ... nice !

Posted by: Brian | 2008-04-23 3:12:23 PM

Forget Argentina, they will soon reap what they have sown. Friggin' idiots.
As for Chavez's "reforms", very predictable indeed.
No story here.

Posted by: atric | 2008-04-23 3:39:15 PM

Notice in the pic a good supply of a-wipe...makes sense when you have nothing to eat.

Posted by: economics 101 | 2008-04-23 5:14:56 PM

On a visit to Argentina two years ago I could by a kilo of excellent beef tenderloin for the equivalent of $5.00 US. We were told that the Argentine government limited the export of beef and then subsidized its production to make it possible for the average citizen to be able to afford beef. The restaurants prospered as we were fed some of the best beef dinners I have ever had. And that is saying something for an Albertan.
Still, whatever government gives to one segment of the society will have to be paid for by another segment.

Posted by: DML | 2008-04-23 7:53:28 PM

Get everybody smoking pot and getting the munchies as the food runs out. But then if they do some coke they will suppress their appetites. Sort of like taking some speed with a tranq to to feel ... normal but not hungry.

What a circus.

And all the while Chavez works to turn all business into non profit organizations. Ya, that'll work.

Posted by: John V | 2008-04-23 8:11:17 PM

Back in the 1990s in Nicaragua when the Sandanista communists were in control, the grocery shelves were always full -- of rice, sardines, rice, sardines, rice, sardines, mostly imported from China.

Posted by: dewp | 2008-04-23 8:59:25 PM

Old Soviet joke-
Customer- Why are you selling your fish for 10 rubles per kilo when I can go down the street where they are offered for 8 rubles per kilo.
Shopkeeper- Is that so, then go to him to buy your fish.
Customer- I would but he doesn't have any.
Shopkeeper- If I didn't have any, I too would sell them for 8 rubles per kilo.

Posted by: DML | 2008-04-24 9:03:47 PM

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