Uruguay and New Zealand: no copying allowed?

 I am currently starting a project that will (well, may) end with a comparison of Argentina and Canada. Along with Argentina and Australia, that is a comparison that many scholars have noted, even if the literature so far has shed less light on the mystery of Argentine failure than one might have expected. 

A recent paper by Jorge Álvarez Scanniello, however, notes an even better comparison: Uruguay and New Zealand. (Apologies to all for also putting this post under the “Argentina” tag. I did it for future reference, at least until Typepad develops a widget for nested topic searches. In my defense, many Argentines are still unclear on the fact that Uruguay is a country.) Moreover, the paper focusses in on livestock. So it is a one-industry comparison between two like countries. 

How similar were they? Well, here is chart of livestock exports as a % of all exports:

OK, so far, so similar. But maybe they exported to different markets or had different trade preferences, and therefore maybe experienced different economic shocks? Well, here are their terms of trade:

Pretty correlated until the 1990s, by which point Uruguay had already fallen from 80% of New Zealand’s income per capita circa 1925 to only 50%.

Well, maybe New Zealand was just a better place for cows and sheep?

 

Line 1 is the ratio of New Zealand’s “meat equivalent” per hectare to Uruguay’s. It is about the same until 1930, which is when (not coincidentally) N.Z. starts to pull away in the income tables. The other three measures do not go back as far (for details, page 6) but show the same post-1930 trend. Basically, the two places look about as good for cows until 1930, when New Zealand becomes a lot better.

So what happened?

Well, the paper has only hypotheses, but they are interesting. In New Zealand, university botanists in 1920-40 developed better strains of ryegrass combined with clover that could fix nitrogen and reduce fertilizer use. So, better pasture. Then, in 1940-66 the country started using aerial topdressing (dropping fertilizer from airplanes) combined with a great deal of government investment in things like rural roads and electrification. 

In Uruguay, well, they saw what was happening in New Zealand. In 1951, Uruguay sent a team of experts to New Zealand to copy their technology for improving grasslands, but it never really went anywhere, with improved lands stalled out at 12% if the total around 1975. (Graph 10.) Why? Well, results on improved lands seemed to fall behind those in New Zealand. Since farmers were not really making more money, they stopped bothering.

In other words, something stopped Uruguay both from developing its own indigenous technology and from successfully adopting techniques from New Zealand.

What could that block have been?

Comments

[shah8]

I will put my chips on high degree of financial integration (and ag integration with Australia), leading to superior techniques and technologies that amounts to a hidden added value system.

Be willing to bet that Uraguayans were undercapitalized in terms of materials and training, and that had a big impact on the results they got. Just like the Chinese can play around with Russian high performance aircraft engines, doesn't mean they can easily manufacture to same standards.

[Sam]

Human capital? New Zealand had an illiteracy rate of two percent in 1900, compared to Uruguay's forty percent. The latter fell tenfold by the 1980s, sure, but it's still indicative of a much weaker and more fragile technological tradition.