South America drought hits corn yields

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RIO DE JANEIRO, Jan. 31 (UPI) -- Drought in Central and South America is affecting corn yields, a boon for U.S. corn exporters but a cause of major worries for agriculture traders in Argentina, Brazil, Paraguay, Uruguay and Mexico.

Dry conditions blamed on La Nina weather phenomenon caused political wrangles in Argentina, led to a state of emergency in parts of Paraguay and relief measures in other countries.

Argentina is the world's second largest corn exporter after the United States.

Argentine President Cristina Fernandez de Kirchner is facing farmer unrest over allegations her government's relief program is too little too late for many communities affected by drought.

Argentine agriculturalists said La Nina could diminish corn yields in the country by 2 million tons.

U.N. Food and Agriculture Organization economist Liliana Balbi said current projections reduced estimates for Argentine corn yields from 23 million tons last year to 21.4 million tons this year.

Corn yields in southern Brazil are down about 1.5 million tons. South Brazil accounts for more than 60 percent of summer corn exported by the country, the world's third largest exporter.

The drought has caused political disruptions, more so in Argentina than in other Latin American countries. Relations between Argentina's government and importers soured after Fernandez slapped new taxes on traders and refused to budge in the face of furious demands for change.

Fernandez also upset farmers' groups after ignoring demands for more emergency aid to drought-stricken areas of the country.

The latest potential political flash point was caused when the government refused to defer new legislation that importers denounced as punitive, restrictive and wrapped in red tape.

Further complications arose after trade partner Brazil, increasingly under pressure over drought damage to its own crops, objected to new Argentine rules coming into place. Argentina and Brazil have $30 billion-a-year trade.

Critics say the new rules, going into effect next month, will introduce more bureaucratic delays. Manufacturers said the rules would inhibit industrial production and growth as they would likely impede the flow of components, raw materials and other industrial inputs.

Brazilian Foreign Trade and Industry Minister Fernando Pimentel declared that in contrast to amicable political ties the "trade relations with Argentina are a permanent problem." Brazilian media criticism of Argentine trade policies has gained momentum amid calls for retaliatory steps.

The government of Brazilian President Dilma Rousseff has said it wants to wait and observe till March before taking countermeasures against Buenos Aires.

The influential Sao Paulo Federation of Industries in Brazil said the new Argentine import rules could affect 80 percent of Brazilian exports to the country.