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Soybean boom in Paraguay

Feeding a growing demand from China, soybean cultivation is booming in Paraguay, the world's fourth-largest exporter, bringing prosperity to one of South America's poorest countries.

by: Reuters: Kevin Gray | 04 Jun 2007

The bonanza has also unleashed a national debate. Big producers herald it as Paraguay's best engine for development; critics say it threatens the environment and the livelihood of thousands of small farmers in a predominantly agricultural country

"The best business in the world is, without a doubt, grains production. We are rich in agricultural potential, we just don't know how to exploit it," said Tranquilo Favero, a native Brazilian who is Paraguay's biggest individual soy producer.

The benefits of the boom are on full display in this town of 12,000 located in the heart of Paraguay's main soy-growing region in the Itapua department, 370 kilometers (230 miles) south of Asuncion, the capital.

Shiny new pick-up trucks cruise the streets in Obligado, rolling past stores offering the latest models in brand name washing machines and mobile phones.

Soybean exports by the local cooperative, one of the country's most organised, grouping some 3,500 small and medium-sized farmers are the motor of the town's economy.

"Everyone here lives off of soy, the butcher, school teachers, shopowners," said Eugenio Closs, a spokesman for the co-op.

The other side
But kilometres away, down red dirt roads, small farmers living in wooden shacks on parcels of land struggle to survive.

Many are subsistence farmers and have abandoned cultivating soy on their plots, saying the heavy machinery and pesticides it requires makes growing the crop less profitable.

Some farmers, frustrated they couldn't make ends meet, sold their land to big producers, adding to disparities in a country where more than 74 percent of the land is owned by 2 percent of the population.

Toxic pesticides and the increasing clearing of lands to plant soybeans are also raising environmental questions, experts say.

The golden egg
Paraguay ranks behind the United States, Brazil and Argentina in soy production. This year, thanks to good weather, Paraguayan farmers harvested a record 6.5 million tonnes.

While global demand for soybeans is driven by China, Paraguay does not have diplomatic relations with one of its major end markets, exporting most of its soybeans through Brazil and Argentina or Uruguay.

The soy boom has left some worrying the country is developing a soy dependency. "If we don't diversify, our fortunes will always be tied to international commodity prices," said Fernando Masi, a senior economist at the Center for Analysis of the Paraguayan Economy.

(additional reporting by Daniela Desantis)

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