As Brazil works to maintain its dominance of the soybean market, it is facing an ascending challenge: a flood of cheap grains smuggled illegally from Argentina.
On January 4, the Argentine government reported a 7.6 ton seizure of contraband soy being illegally exported to Brazil. This continued an escalating situation from 2021, when 2,530 tons of contraband soy were seized going from Argentina to Brazil in the first quarter of the year, reported La Nación.
Contraband soy has been flooding Brazil in recent years, with the border city of El Soberbio, in particular, becoming a hub for the illicit economy. According to the media outlet La Nación, clandestine ports dot the city's shoreline along Uruguay River, where the product is loaded on wooden rafts and canoes to be delivered in the state of Rio Grande Do Sul.
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The magnitude of smuggled grains pouring into Brazil is impressive. In April 2021, Clarín reported estimates from Argentine Customs officials that between 180,000 and 200,000 tons of soy find their way into Brazil annually.
However, the world's soy powerhouse is not alone in this predicament. Paraguay and Bolivia have also found themselves in the crosshairs of soybean smugglers. Last November, Argentine officials seized over 500 tons of soy to be exported to Paraguay and caught over 200 tons destined for Bolivia, both in single operations. Though seemingly less profitable than the Brazilian market, smugglers are making use of porous borders to inundate Argentina's neighbors with the product.
The underlying driver is a stark profit differential: while a ton of soybeans fetches a price of roughly $272 in Argentina, that same cargo goes for nearly $844 in Brazil, roughly $500 in Paraguay and in Bolivia.
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Since June 2019, soybean prices have consistently climbed in Brazil, with prices skyrocketing in late 2020 and early 2021. Matched with the plummeting value of the Brazilian real and seemingly insatiable demand from overseas, Brazil has spent the past two years pumping more and more soy into for foreign markets.
All these factors have aided in creating a boom with Brazilian suppliers racing to meet demand, producing ever-larger quantities of soy each year until the country outpaced the US, becoming the dominant global producer in 2020.
It appears Argentine smugglers are cashing in on this rising tide, pumping higher and higher quantities of contraband soy into the Brazilian market, as evidenced by seizures in the past year. Transporters understand that the risks of a fine or even imprisonment pale in comparison to the profits.
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Transporters of the grain and even police officers have been apprehended, though Argentine authorities fear involvement from large-scale agro-exportation companies that may be exploiting the illicit economy as well. A report in March 2021 alleged that these export companies were also collecting contraband soybeans to complement their exports.
While there are new border checks, the economic realities in Argentina and Brazil, compounded by the normalization of contraband within these border provinces, make stopping the flow of contraband soybean an unlikely task.