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Article: Latin American agchem sector coping with first Covid wave but wary of a second
10 August 2020
Jose Perdomo, president, CropLife Latin America and Javier
Fernandez, regulatory affairs adviser, CropLife Latin America talk
to Crop Science reporter, Robert Birkett
Javier Fernandez
Jose Perdomo
Robert Birkett: What lockdown measures are in place to
combat the Covid-19 pandemic, where and since when?
Jose Perdomo: When the pandemic hit Latin America in March, most
governments in the region - almost all - decreed sectors including
healthcare and agriculture as key priority sectors. This allowed
the agriculture industry to remain open in a way others would not.
And that included everything that supports agriculture as a
national strategic authority. They are still operating as that.
Javier Fernandez: Emergency decrees made agriculture a critical
industry, limiting transport restrictions, allowing farmers to work
in the fields. The lockdown has even elevated agriculture in
people's perceptions. For example, in Costa Rica, the tourism
economy has been severely hit while agriculture has continued
supplying.
JP: A lot of city folks are realising the importance of farmer
efforts, with local produce replacing imports as the airports have
shut and no imports are arriving. Farmers are resilient and finding
ways to cope.
RB: In what ways are these decrees designating
agriculture as critical helping the industry cope?
JP: Well for example, in Guatemala, we have a curfew that runs
6pm to 5am. There are no people out, no cars, and no deliveries.
The only vehicles allowed to transport goods are those for
pharmaceuticals, food, agricultural inputs, … everyone else is in
lockdown. Critical services can work outside of these rules.
Some of the companies began to put employees back in offices in
July, others not until the end of year. Manufacturing facilities
have not stopped during the period. They are just under stricter
working conditions for safety such as social distancing.
RB:Latin American has a large
dependence on agrochemical imports, principally from China, which
was the first country impacted by la severe lockdown hitting
manufacturers and distributors. What impact did that have on the
agrochemical sector in Latin America?
JP: Towards the end of last year, certain market movements
influenced suppliers to stock up for the 2020 season. Companies
sometimes overstock in order to make their purchase and supply
numbers, and in this instance, it worked to their advantage. It
looks as though the 2019 market grew by 6% for our [associate]
companies, and maybe 3% for all. Suppliers are concerned about the
second semester if there are restrictions on imports. But as
agriculture is designated as a critical sector it should have
preferential treatment for imports, so any problems should be
delayed. And stocks did not go as low in 2019 as normal.
JF: I was curious whether the loss of imports from China would
lead to fewer counterfeit products as our experience is that many
such products are sourced from China, or more as counterfeiters
take advantage of the fall in trade. When Covid started, I tested
the hypothesis on the former, but from this unofficial poll
surveying our members found that it was the latter and counterfeit
trade rose. As inventories fall, trading in counterfeit products
may rise based on the conversations I have had.
JP: The world has changed, perhaps more than we have yet
realised. We still live on what we had going into 2020. But things
will get tougher in the next 6-12 months as supply chains weaken
and the supply of ais manufactured in China that formulators need
dry up. Companies are good at planning ahead and that may help, but
smaller companies that may not be planning two years ahead like
larger ones do will get hit.
JF: All our airlines have shut down in Central America. And
we're a big agricultural exporter, and most airlines are not making
it out. So fresh produce, or flowers from Colombia will suffer.
There may be more sea freight, but with seasonal products, it is
going to get harder to get exports out to their markets.
JP: I think it is easy to switch suppliers, if necessary, as
substitute products are available. But credit risks for growers to
buy products will rise in 2021 as uncertainty deepens, raising
costs or reducing access.
RB:What measures is the sector and
farmers demanding of regulators?
JP: Nothing new other than regulatory issues that we face in
different countries, such as in Mexico where the Ministry of the
Environment is trying to rule on products via a heavy use of the
precautionary principle rather than on science. They are
restricting imports on products [glyphosate]. Besides addressing
those things, and the problems our exporters face with maximum
residue limits in Europe, forcing farmers to realign, there is no
specific action sought beyond what has already been taken.
RB:The agrochemical market in Latin
America bucked the global trend in 2019, and continued a rebound
after a multi-year slump. What are the reported trends since the
turn of the year?
JP: It is difficult to forecast with the Covid disruption, but
initial readings that large export crops such as soybeans and maize
are holding up and China is absorbing some of that. And there was
good production in Paraguay, Bolivia, Brazil and Argentina. We
expect that there will be an expansion in area, especially in
Brazil with potential for more pastureland. Apparently, cotton and
sugar cane were boosted by low price for oil. We believe the world
will still need the food Latin America produces. At the end of
2020, we expect agriculture will still be strong and probably
learning to become more resilient in a new environment.
RB:What is happening to prices? And
what is driving this?
JP: Currency devaluations are being suffered across the region,
particularly Argentina, Brazil and to some extent Mexico. This will
boost exports, but farmers will have higher costs, too. So, growers
will put up with higher prices if they have export crops.
RB:The US/China trade war has
reportedly benefited South American trade with China. How would you
describe this benefit? How much has it boosted agrochemicals, and
what sectors, in Latin America?
JP: Over last 5 years, China has been investing in Latin
America, into Venezuela, Ecuador and Guatemala. China sees Latin
America as strategic and is investing for the long term. The
Chinese wanted to buy 4 m ha in Brazil but were stopped for fear of
colonisation. Some trade deals have focused on Asian countries,
with the US exit from Pacific trade deal, opening a path of
leadership with China in our direction.
JF: The trade war has direct influence on soybeans and Argentina
and Brazil are beneficiaries. Long-term contracts don't vary in the
short term. China is too far away for fruit and vegetables,
especially with air freight grounded. Mexican President Amlo [Lopes
Obrador] made his first visit to Washington last week and seemed
friendly to discuss and agree USMCA [United States-Mexico-Canada
Agreement - the new NAFTA]. Canada was in dispute on aluminium and
so didn't make it. The US got some Mexican concessions on
immigration and labour. We may see change of tone in Mexico getting
some certainty with the US with this new deal seen as a victory.
USMCA is NAFTA 2.0 and came into force last week [two weeks ago at
time of going to press].
RB: With these long-term contracts, would Latin
America's benefit from the trade war be long term even with a
change in US politics?
JP: I believe so. Americans have not paid too much attention to
South America other than problems with immigration or drugs. But
China has focused far more on Latin America, and it sees us as a
good opportunity as the region develops further. Regardless what
happens in the US, China will invest in Latin America. China can be
a key player if the US does not have a clear policy towards helping
and developing its neighbours.
RB: In the latter half of last year, the trading bloc
Andean community's (Comunidad Andina) approved adoption of the
classification and labelling of pesticides under the GHS (Globally
Harmonised System of classification and labelling). What measures
were adopted?
JP: It happened, finally. The "Manual Tecnico" on GHS for
labelling has been approved for all of the Andean member states
(Colombia, Ecuador, Peru, Bolivia).
JF: The Andean trading bloc norms are binding, unlike in Central
American where agreements to harmonise seem to allow states to
adopt measures only as they see fit. Technical Manual 2075 is
ground-breaking, introducing GHS. It allows a five-year transition
to adoption for each country. From the Mexican experience, the
transition is not that easy, changing labels and getting rid of
inventories can be costly. It adds to language, the use of
pictograms to labels, but brings a toll on the cost side. So, the
five-year transition is helpful.
It is also challenging for regulators to switch models, but what
I have liked about the Andean process has been the collaboration of
public and private sectors and of stakeholders. They will also
include domestic MRLs and risk assessments. One of the issues of
controversy among states was CMR [carcinogenic, mutagenic and
reprotoxic] labelling, of carcinogenicity producing various views.
I think regulators got carried away with IARC categorisation as
carcinogenic, but they decided that that would be an element of the
regulatory decision making, but that if companies could demonstrate
with evidence that a product was unlikely to be carcinogenic, they
would not label it as such - the EPA approach. So, companies can
contract out the CMR of their product.
RB: What commitment has been made equivalence
registration system and which countries are therefore adopting
it?
JF: This triggered passion and did not make the harmonised
legislation, regulators leaving it for a later date, a second
stage. At present, countries can adopt equivalence on a
state-by-state basis as they want.
RB: The CropLife annual report mentions work
onincorporating of registration by equivalence in
Chile. What happened there?
JF: There was movement on regulating agrochemical approvals in
Chile with Resolution 5057. There was a lack of understanding of
what to use as a reference profile for a registration. A working
group including SAG [the Ministry of Agriculture's agricultural and
cattle service] and industry last year came to agree terms - the UN
FAO approach - that when there is more than one approved product,
the registration with the most complete data package will serve as
the reference profile for an equivalence-based approval. Their
challenge was that they were in transition from a formulation only
type of registration to one on actives, and cascading to
formulation. The old system created a critical mass of profiles,
and confusion on what was available to use as reference. But common
ground has been found.
JP: We also worked with Uruguay. The country has lagged on
regulations, but new governments have moved towards a more
transparent system. We believe Uruguay will harmonise more with
other countries on regulations.
JF: Uruguay has had an outdated 1960s style regulatory system on
formulations. It is cautious about rivers, water contamination and
causing problems with Argentina. I believe it has atrazine
[herbicide] concerns in the past. Now a regulatory overhaul is in
the offing. An FAO consultant from Chile assessed the system, and
has been demanding environmental risk assessments, which I expect
will be the start of a regulatory overhaul.
RB: How significant is biological crop protection in
Latin America, and in which countries is adoption by growers and
regulation advancing most noticeably?
JP: Some 18% of global market in biologicals is in Lat America.
Biologicals account for 4-5% of Argentina and Chile's crop
protection markets. Perhaps 2-3% in Paraguay and Uruguay. Brazil is
likely much higher. But it is a sector that needs up-to-date
regulations, with many products being "homemade", in which the
regulatory sphere is rather loose. R&D companies have bio
offerings. But in Latin America, about 50% of farmers are
smallholders and they are often the last to get such technologies,
but the other 50% will be adopting, especially as part of IPM.
JF: Not many countries have regulations in place. We are
concerned of overkill [on forthcoming regulations] such as "what is
applicable to agrochemicals, let's use that for biologicals". We
are trying to strike a balance between no regulations and overkill.
It remains in its infancy, but it is an attractive option for
growers on perceived safety and MRL hurdles.
JP: CropLife Brasil is trying to bring together work on being an
agrochemical industry association and one that integrates
biologicals. Meanwhile, digital agriculture is everywhere. We
[CropLife Latin America] are creating our own app to allow farmers
to get remote training. We have noticed that farmers are
increasingly using smartphones for receiving news.