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The COVID-19 pan­demic has damp­ened the eco­nomic prospects of table olive and olive oil pro­duc­ers in north­west­ern Argentina, as exports to the lucra­tive Brazilian mar­ket grind to a halt.

Slowing demand in Brazil com­bined with low olive oil prices, have left many pro­duc­ers barely able to pay the wages of their har­vesters. Some are even con­sid­er­ing whether or not to aban­don their groves.

“The issue of coro­n­avirus has slowed sales,” Julián Clusellas, pres­i­dent of the Valle de La Puerta olive oil com­pany and a board mem­ber of the Argentine Olive Federation, told Olive Oil Times. ​“Transportation is slower and the costs are a lit­tle more expen­sive. But the main prob­lem is that con­sump­tion is going to slow down.”

Brazil is by far the largest mar­ket for Argentine table olives and a sig­nif­i­cant one for the country’s olive oil as well.

Between 65 and 70 per­cent of Argentina’s table olive har­vest is exported to Brazil, Clusellas said. On the other hand, about 17 per­cent of Argentina’s olive oil exports from 2017 – the last year for which data are avail­able – were des­tined for Brazil, accord­ing to the International Trade Center.

“We know that there are sev­eral oil pro­duc­ers who are hav­ing dif­fi­culty export­ing for lack of firm demand and are at high risk from the sit­u­a­tion that we see with the Brazilian mar­ket today,” Clusellas said.

The coro­n­avirus pan­demic has hit Brazil par­tic­u­larly hard. To date, the coun­try has more than 101,000 recorded cases and an offi­cial death toll of more than 7,000. However, test­ing has been lim­ited and many experts believe both fig­ures are far higher.

While much of Brazil has not closed down due to the pan­demic, the country’s econ­omy has con­tracted sig­nif­i­cantly. The real, Brazil’s cur­rency, has deval­ued by 45 per­cent, mak­ing it far more expen­sive for importers to buy Argentine goods.

“Brazil is not a coun­try that has a flex­i­ble exchange rate, so when the cur­rency deval­ues, mer­chants do not update prices and imports fall,” Clusellas said.

The country’s retail­ers are less likely to restock their shelves when the real deval­ues because their profit mar­gins on imported table olives and olive oil drop significantly.

According to pro­jec­tions from the Getulio Vargas Foundation, a Brazilian think tank focused on the econ­omy, imports from Argentina in 2020 are pro­jected to decrease by 11.7 per­cent com­pared to last year. In prac­ti­cal terms, that comes out to $9.32 bil­lion in lost rev­enue for Argentine pro­duc­ers across a vari­ety of sectors.

However, Clusellas added that olive oil pro­duc­ers who export to Europe and the United States have only had minor incon­ve­niences caused by the pan­demic. According to the International Trade Center, Europe and the U.S. were the des­ti­na­tion of 57 per­cent of the country’s olive oil exports in 2019.

On top of slow­ing demand in Brazil, prices for both table olives and olive oil have remained per­sis­tently low for more than a year.

Clusellas said that many pro­duc­ers in Argentina are sell­ing for less than half the value they were in the 2017/18 crop year, with many of them unable to cover their pro­duc­tion costs. In order to remain sol­vent, some have had to turn to the country’s national bank in order to receive emer­gency loans.

Clusellas warned that this could be the begin­ning of a vicious cycle; one in which pro­duc­ers have to cut costs in order to remain in busi­ness. This, in turn, will impact their abil­ity to return to pre-pan­demic pro­duc­tion lev­els and grow exports after the coro­n­avirus cri­sis has passed.

“Companies seek­ing to con­tinue their activ­ity will have to review their expenses and cost sched­ules,” Clusellas said. ​“They will either make adjust­ments, and so are one step away from aban­don­ing their farms and low­er­ing pro­duc­tion. Maybe some will even con­vert to rais­ing livestock.”

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