Paraguay’s agricultural sector reflects constantly on the need to negotiate with China. Though the two countries do not have diplomatic ties, Paraguayan meat and soy already reaches China through other countries, meaning they do not benefit as much as they could.
Paraguay is landlocked but producers want to ship directly through members of Mercosur, the South American customs union whose other full members are Brazil, Argentina and Uruguay. The plan has gained ground recently due to US-China trade tensions and poor crop yields elsewhere that resulted from bad weather. Soy producers submitted a formal request to the government to consider a trade pact months ago.
Paraguay's president Mario Abdo Benítez, confirmed that any deal would respect the country’s formal recognition of Taiwan.
"Mercosur is working for a free trade agreement with China. It is a proposal from Uruguay. That will be the way for Paraguay to reach that market but we will not accept breaking relations as a condition," the president said.
However, Paraguay’s agricultural exports are associated with deforestation and high agrochemical use and scaling-up to meet Chinese demand could worsen this, civil society groups fear. They are also concerned that laws on deforestation and regulations on crop fumigation and preservation of waterways are routinely disrespected.
Land use change
Agriculture and land use change are Paraguay’s main sources of greenhouse gas emissions. They account for 53 and 31%, respectively, according to the Ministry of Environment and Sustainable Development (MADES).
of Paraguay's greenhouse gas emissions come from agriculture
Between August 2017 and 2018, 265,589 hectares of land changed usage, according to the National Forestry Institute (Infona).
A recent study by the World Bank argued that deforestation and the current concentration of activity in the industrial agricultural sector negatively impact the country's economy as smaller players and the integrity of its “natural capital” are compromised.
Exporting the problem?
Negotiating with China is key to unlocking Paraguay’s growth potential but enhanced trade must benefit Paraguay’s wider population and protect the environment, according to Ramón Fogel, a sociologist.
"Producers have control of key public institutions. For a country that grows a lot of soy, it's a problem. Cancer rates, infant mortality and [physical] deformities linked to direct exposure to the crop and pesticide residues that reach people through food rise from year to year,” he said.
Paraguay also exports the problem to China. "Waste is left in everything in the soy supply chain, in this case in the pork they consume,” Fogel added.
Oilseed also reaches China through other markets, mainly Argentina. As of December 2018 Some 67% of Paraguay’s annual exports went through the neighbouring country.
Beef also reaches China in the same way. Larger shipments have flowed since the company Frigorífico Concepción announced the export Paraguayan meat to China through Bolivia, where it has an industrial plant.
Victoria Peralta, an engineer and ecologist, questions the lack of environmental thinking in Paraguay’s agricultural sector.
"Regulations for fumigations are not met, nor are weather patterns or conditions taken into account. There are soybean crops around schools and health centres. The Zero Deforestation law is not met and there is clearing even in protected areas," she says.
The expansion of soy on sensitive lands such as the Guaraní aquifer, one of the largest underground freshwater reserves in the world, is also a major concern.
"The spillage of pesticides ends up contaminating the surface as well as the water courses that run off as there is no forest cover," Peralta said.
Soy cultivation covers 80% of Paraguay’s agricultural land, mostly in the eastern region. Production grew as a result of massive deforestation and the accelerated degradation of the Atlantic Forest, of which only 13% remains, according to a report by WWF Paraguay.
The silvopastoral livestock system, which rears cattle alongside the preservation of forests that nourish soils and offer shade, as well as designating zones for intensive crop cultivation, is a more sustainable alternative, Peralta said.
As of May, soybean cultivation covers 3,736,158 hectares in Paraguay, according to national oilseeds and cereals chamber (Cappro). The country exported a total of 6,237,190 tonnes from the 2017/2018 harvest.
Having no relations with China is like we do not live in the globalised world
"We have a certain production potential and more than that we cannot accommodate. We will sell what we have to China. The frontier could expand between 5 and 10%, perhaps in the [forested] Chaco," said Dante Servián, president of the Itapúa Agricultural Coordinating Committee.
Servián’s committee submitted the request to the Ministry of Agriculture and Livestock to negotiate with China. So far they’ve not managed to make contact with Chinese businesses.
"Having no relations with China is like we do not live in the globalised world," he said.
Following China’s swine fever outbreak, Servián said a trade agreement would help Paraguay, which depends on agriculture, to become an important food supplier to China.
The US-China trade war is having an impact, Servián said.
Understanding the consumer
A better understanding the Asian market, the relevant authorities and their decision-making processes is sorely needed, according Gustavo Rojas of Paraguayan economics think-tank Cadep.
Paraguay's trade deficit with China is currently US$3.4 billion, equal to 17.4% of the country’s entire commerce with the rest of the world.
"Nothing prevents the government from encouraging Paraguayan producers to travel to China, facilitating their visas, and creating an easier system for Chinese investors to come to the country. There are unilateral measures that can be undertaken,” Rojas said.
For Fogel, trade must be sustainable and consist of non-GMO foods that have little impact. Nor will Chinese consumers accept foods tainted by chemical pollution.