President Luiz Inacio Lula da Silva of Brazil has offered farm credits to boost exports.

By ANDREW DOWNIE

SAO PAULO, Brazil - Luciano Alves planted beans, corn and grain on about 3,000 hectares of his farm in southern Brazil last year. This year he is planting 3,480 hectares. And he credits Brazil’s president, Luiz Inacio Lula da Silva, with the increase.
“The government is helping us finance the purchase of new machinery,” he said. “They reduced the interest rates we pay and have given us more time to pay off the loans. It’s vital.”
Rising food prices mean many farmers around the world are reaping record profits. And South America’s agricultural powerhouses, Brazil and Argentina, are responding to the farming windfall in opposite ways.
Mr. da Silva’s government has announced record farm credits to encourage farmers to produce more while export prices are high on world markets, a move that should improve Brazil’s economy.
But Argentina, Brazil’s economic and political archrival, decided to share the agricultural wealth at home. Worried about inflation, the government of Argentine President Cristina Fernandez de Kirchner increased export taxes on some crops, a move meant to keep down domestic food prices by encouraging farmers to sell more at home.
“In our country the government is trying to get money to subsidize other sectors of the economy,” said Eduardo Cucagna, president of FN Semillas, an Argentine seed company, who objects to the policy. “I think Brazil is doing the opposite, adapting to what the world is offering now. They’re doing it right.”
In the race to capitalize on the tight global food market, Brazil has a number of advantages over its southern neighbor. It is much bigger, with around 70 million hectares under cultivation, more than twice that of Argentina.
It has a wider range of farm exports. And while Argentina is the world’s second biggest exporter of corn and the third biggest exporter of soybeans, Brazil is the world’s first or second largest exporter of beef, soybeans, orange juice, chicken, sugar and coffee.
The government in Brasilia wants it to stay that way. In July it announced a $49 billion credit line for farmers, up 12 percent from last year. Officials said farmers needed the credit to buy machinery, pay for seed and fertilizer, and increase productivity.
“Our productivity can’t remain the same if people are going to eat more,” Mr. da Silva said, referring to the growing, increasingly affluent populations in China, India and Latin America. “We have to plant more.”
In Argentina, the Kirchner administration tried to raise taxes on grain and soybean exports in line with rising world prices. The decision was intended to force Argentine farmers to sell their wares at home, creating a domestic glut that would keep prices down.
But instead of reaping the benefits, the government reaped a whirlwind of protest. The sliding tariff raised the tax on soybeans, Argentina’s most important export, to almost 50 percent. It also infuriated farmers, who took to the highways in sometimes violent demonstrations. The Senate narrowly voted against the measure in July, and the tax rate is now fixed at 35 percent.
While that wave of turmoil has subsided, farmers said suspicion and uncertainty remained. “The problem has not been solved, and it needs to be solved quickly,” said Sean Cameron, a grain farmer who is president of Aprotrigo, an farm industry organization.
Many farmers want the government to enact policy changes that would make it easier and more profitable to export. Some trade experts say Argentina needs to make such changes. But many analysts believe both Argentina and Brazil will eventually benefit from the run-up in global food prices.
“They have different approaches to what is happening in the world agricultural markets,” said Simla Tokgoz, an international grain analyst at the Food and Agricultural Policy Research Institute, an research center based in Iowa. But “short-term volatility happens in all countries. In the long term, Argentina has great potential to increase production and to continue to be a major exporter of grains and oil seeds.”