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Uruguay Agricultural Stagnation
A troubling issue for the agricultural sector was the
stagnation of production levels over several decades.
Total
agricultural production increased at an average rate of
less than
1 percent per year from the 1950s to the 1980s. In 1989
the
sector continued a 1 percent growth rate. This low growth
was
usually attributed to a lack of technologically advanced
production methods, but that description applied mainly to
the
large livestock sector. Ranchers continued to rely on
extensive
production methods. By contrast, many crop and citrus
farmers had
adopted more advanced technology, using tractors,
fertilizers,
and pesticides. Similarly, poultry producers relied on
advanced
techniques, and some dairy farmers fertilized their
pastures.
Alternative explanations of the agricultural sector's
poor
performance take note of the overall characteristics of
Uruguay's
economy. First, the small size of the internal market had
forced
most agricultural producers to be exporters. Agricultural
products had become an important source of foreign
exchange, but
fluctuations in world prices and markets buffeted
Uruguay's
externally oriented agricultural sector. For example, wool
prices
fell when synthetic fabrics were developed. Additionally,
the
market for Uruguayan beef contracted when the European
Community
began subsidizing its beef producers in the 1980s.
A second reason for the lack of agricultural growth may
have
been the inconsistency of government policy. During the
protectionist import-substitution industrialization phase
in the
1950s, the government held agricultural prices down in
order to
lower industrial labor costs. This discouraged both
agricultural
production and investment. During the 1960s, the
government
reversed this pricing policy when it encouraged the export
of
certain agricultural products (poultry, dairy, and citrus
products) through subsidies and other incentives. However,
this
export policy was itself reversed in the 1970s, in keeping
with
the military government's effort to open the economy to
foreign
competition. The abrupt withdrawal of subsidies made the
production of several products unprofitable. With
government
policy toward it fluctuating in this manner, agriculture
in
Uruguay was on uncertain ground, and potential investors
remained
wary. Aided by a recovery in the livestock sector,
however,
agricultural output increased by an estimated 3.5 percent
in
1990.
Data as of December 1990
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