Argentina has suffered a currency crisis since the beginning of the year, and the Argentinian peso devalued over 100% against the U.S. dollar since then.
This is sparking increased export taxes for Argentina’s agricultural commodities.
As a consequence of higher interest rates in the U.S. and the European Union, the country’s debt skyrocketed to record levels. As of January of 2018, nearly 18 pesos purchased one dollar. At the end of today’s session, to buy one U.S. dollar, you will need around 39 pesos.
In order to reach a full agreement with the International Monetary Fund, the government of Argentina decided to accelerate its fiscal adjustment and target zero deficit for the 2019 budget. President Mauricio Macri announced US$ 12.9 billion in cuts and the return of export taxes.
On farm exports, the tax rate would be four pesos for every dollar in exports with a roof of 10%. The exception is soybeans, which kept the export taxes already in place. The taxes on the oilseed will have the rate cut anticipated and that will be 18%, plus the four pesos for each dollar. That means if the Argentinian currency continues to devalue, the export tax will disappear automatically.
Biodiesel, soybean oil, soybean meal, or any other processed product will have a rate of 3 pesos for each dollar exported, as a push for industrial exports.
In addition, U.S. president Donald Trump yesterday announced that the U.S. treasury could loan an extra fund of $10 billion to finance Argentina and avoid any possibility of default because the South American country is considered a “valuable friend.”
In the view of Gustavo López, president of Agritrend, based in Buenos Aires, the new tax will reduce the corn surface in Argentina. “Wheat was already planted. Corn is yet to be planted in Argentina after the wheat harvest. And corn was punished again.
“When planting starts, a portion previously thought to be corn will be soybeans. And sales from the old crop perhaps could take longer than expected,” analyzed López.
A report from the market consultancy AZ Group indicates that crop rotation practices would fall in the coming season. “In the case of corn, the profitability will fall 50%. Soybeans are back as the first option of the business, even though it will still have more than estimated,” explained Sebastián Salvaro, an analyst at AZ Group, in an interview with newspaper La Nación.
The president of the Confederation of Rural Associations of Argentina, Dardo Chiesa, qualified the government measures as “treason.”
“One person that betrays you one time can do it many times,” said Chiesa.