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Argentina’s Olive Oil Industry Continues to Face Challenges

Mar. 16, 2011
Charlie Higgins

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The sit­u­a­tion has only got­ten bleaker for Argentina’s flail­ing olive oil indus­try, which despite per­form­ing well at inter­na­tional food com­pe­ti­tions in recent years finds itself in a finan­cial predica­ment dri­ven by stag­nant mar­ket prices and ris­ing pro­duc­tion costs, among other factors.

The recent cri­sis came to the government’s atten­tion in early January, when agri­cul­tural rep­re­sen­ta­tives in Argentina’s Catamarca province requested fed­eral aid after declar­ing a state of emer­gency. The gov­ern­ment responded by exempt­ing olive pro­duc­ers in the region from pay­ing munic­i­pal taxes and fees over the next six months.

Now reports show that Mendoza, another key olive oil-pro­duc­ing region, is expe­ri­enc­ing the same problems.

The indus­try is going through a very dif­fi­cult time,” Armando Mansur, pres­i­dent of Asociación Olivícola de Mendoza (ASOLMEN), told local news­pa­per Los Andes this week. We have falling inter­na­tional prices and ris­ing pro­duc­tion costs, which leaves us with very lit­tle profit margin.”

Among other fac­tors exac­er­bat­ing the prob­lem is the cur­rent state of the olive oil indus­try world­wide. Argentina con­trols just 2 per­cent of the world olive oil mar­ket, which is dom­i­nated by major pro­duc­ers like Spain, Portugal and Greece. Amidst the recent eco­nomic tur­moil in Europe, domes­tic mar­kets in these coun­tries have strug­gled, result­ing in gov­ern­ment-sub­si­dized cam­paigns to sell European prod­ucts abroad and keep prices com­pet­i­tively low. Unable to push the price of oil up and calm pro­duc­tion costs, Argentina’s com­par­a­tively mod­est pro­duc­ers are get­ting left in the dust.

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Just how much have these prices fallen in recent years? According to Los Andes, olive oil sold for $3,600 a ton in 2009. By 2010, the price of oil had dropped to $3,100 a ton and today hov­ers around $2,400.

The decay of inter­na­tional oil prices wouldn’t be so detri­men­tal to Argentina’s indus­try if the major­ity of its prod­ucts were sold domest- ically. But less than 30 per­cent of the country’s olive oils are con­sumed inter­nally, with the rest being exported. Argentina’s stub­born high export taxes only serve to com­pli­cate the sit­u­a­tion fur­ther for olive pro­duc­ers, not to men­tion high infla­tion and a US dol­lar that won’t budge.

Mansur reminded reporters that this is not the first time Mendoza’s olive pro­duc­ers have expe­ri­enced hard­ship. We’ve been try­ing to get aid to help us alle­vi­ate the sit­u­a­tion. On September 27 we urged the Government of Mendoza to declare an emer­gency on the sec­tor, and we reit­er­ated that request on February 8 of this year.”

Unlike the quick gov­ern­ment response in Catamarca, Mendoza has yet to receive aid. Mansur pointed out, On February 22 they responded by giv­ing us a phone num­ber and report num­ber to check up on how the sit­u­a­tion was being man­aged. We have no con­crete results yet.”

Mansur explained that the provin­cial gov­ern­ment had promised 600 pesos (about $150) to each employee, if the local grow­ers could pro­vide proof of the grav­ity of the sit­u­a­tion. ASOLMEN then funded a study with the National University of Cuyo Department of Agricultural Economics and Sciences. The acknowl­edged our efforts, but still no results,” said Mansur.

Mansur also added, we real­ize that the rel­a­tive impor­tance of the olive oil indus­try is greater in Catamarca than in Mendoza but we’re still talk­ing about a very impor­tant sec­tor for Mendoza.”

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