Paraguay’s cursed green gold

Harvesting around 10 million tonnes of soy annually, Paraguay is the fourth-largest exporter of the crop in the world. Soy now covers 80 per cent of the country’s agricultural land and accounts for 12 per cent of GDP. However, the rapid increase in soy cultivation to satisfy growing worldwide demand has major economic and societal consequences in Paraguay.

Background

The cultivation of soy began to expand dramatically from the mid-1960s onwards, ironically as part of a national drive to increase wheat production: the government at the time envisaged wheat being grown in winter and soy in summer. By 1980, soybeans had replaced cotton as the country’s most important crop. Soybeans covered 564 sq km in 1978, and less than ten years later, the crop had spread across 7,188 sq km. Currently, there are around 31,000 sq km dedicated to soy in Paraguay, and it is likely that this will grow to 40,000 within ten years.

The soy grown in Paraguay is generally not used for human consumption, but rather to supply the vast demand for animal feed and agricultural fuel. Raw soybeans from Paraguay are exported to the E.U. and Russia.

Economic implications

Paraguay’s expansion in soybean cultivation accompanies a global spike in demand for soybean which is driven by an increase in meat consumption, particularly from a growing middle class in China. While China is not a key importer of Paraguayan soybeans, it is the world’s largest consumer of soybeans, importing about 60 per cent of the global soy harvest. As a result, the Asian giant plays a major role in determining the way in which markets for the oilseed crop will move.

Paraguay’s expansion in soybean cultivation accompanies a global spike in demand for soybean which is driven by an increase in meat consumption

The Paraguayan economy is heavily dependent on agriculture, which represents around 20 per cent of GDP every year and employs approximately half of the population. The expansion of soy farming to match growing demand has generated large profits and rapid growth over the last forty years. Despite its main export partner, Brazil, entering a recession, Paraguay’s economy has continued to grow: in 2015, the economy grew almost 3 per cent, and is forecast to expand a further 3 per cent annually for at least the next four years. Paraguay’s consistent growth is in part due to record soy harvests, around 70 per cent of which is exported every year.

Despite these impressive figures, the economic advantages have not been evenly distributed across the population. Almost 20 per cent of the population lives in extreme poverty, a figure that rises to almost 30 per cent in rural areas. The production of soy is concentrated in large farms, with the multinational corporations Archer Daniels Midland, Bunge and Cargill accounting for 70 per cent of all soy exports.

The soy boom has only widened the existing income gap, with major social implications

Soy is a high external input crop, meaning that resources such as pesticides and fertilisers are necessary for a successful yield. Given the high rates of poverty in rural Paraguay, many family farms are unable to purchase the resources they need, or rent storage space for their harvest. As a result, they must sell their crop quickly, often during the peak of the harvest when prices are lower.

The soy boom has only widened the existing income gap, with major social implications. More than 85 per cent of land is owned by just 2.6 per cent of the population, leaving most small farmers to grow crops such as cotton and sesame, which have been affected by disease and drought respectively.

The large grain corporations also fail to provide employment for impoverished local communities. Only one worker is needed for every 4.5 sq km due to the highly mechanised approach to large-scale soy farming.

Land conflicts

Economic disparity and a lack of opportunities for farmers have worsened land conflicts that existed even before the introduction of soy…

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