E-Malt.com News article: Argentina: New president announces large tax cuts on agricultural exports

Argentina's new pro-business president, Mauricio Macri, announced large tax cuts on agricultural exports on December 14, fulfilling a key campaign pledge but raising fears of grain and soybean gluts on world markets, Yahoo News UK reported.

Macri, who took office on December 10, had promised to slash the South American farming giant's steep taxes on agricultural exports, which triggered major protests by producers against former president Cristina Kirchner's administration.

Export taxes will be eliminated altogether for wheat, corn and sorghum, and for soybeans the tax will drop from 35 percent to 30 percent, Agriculture Minister Ricardo Buryaile told reporters.

Taxes on wheat and corn exports were previously 23 and 20 percent, respectively.

"I am going to sign the decree today," Macri said in a speech to farmers in the town of Pergamino, in the heart of the Argentine Pampas, the fertile plains that are the national breadbasket.

The taxes had been introduced in 2008 under Kirchner.

Protests over the steep rates paralyzed the agriculture sector that year and turned into a crisis for her government.

Farmers accused Kirchner of saddling the agricultural industry with an unfair share of the national tax burden, hurting their international competitiveness.

Macri vowed those days were over.

"Let's not think of things in terms of 'farms or industry,'" he said. "It's farms and industry, farms and the country. Without farms, the country can't survive."

Outside Argentina, markets have been wary of what Macri's victory will mean for already low global prices for agricultural commodities.

Argentine farmers have been hoarding their crops in hopes of more favorable conditions.

They have an estimated 17 million tonnes of soybeans, 20 million tonnes of corn and 10 million tonnes of wheat in stock.

European grain prices were down after Macri's announcement.

Argentina is the world's third-largest producer and exporter of soybeans, after the United States and Brazil, and the largest producer of soy products.

The country vies with Ukraine for the title of third-largest corn exporter, and is the seventh-biggest wheat exporter.

Since 2007, many farmers switched to unregulated crops such as barley to avoid the taxes. The 2015-16 wheat crop being harvested may be the smallest in three years, down 16 percent from a year earlier at 9.5 million tons, according to Argentina’s biggest grain exchange.

The announcement is the first of the economic reforms promised by Macri, who has vowed to overhaul Kirchner's legacy of hands-on economic management, including protectionist import controls, heavy taxes on agricultural exports and an official exchange rate.

Argentina, Latin America's third-largest economy, is suffering from high inflation and faces warnings of a recession next year.

Its foreign reserves are also precariously low, and Macri urgently needs farmers to start exporting their hoarded crops - a key source of hard currency for the central bank.

Agricultural exports are expected to total $25 billion this year, a third of Argentina's total exports.

Macri encouraged farmers to grow even more and ramp up production of processed products.

"We can double Argentina's food production," he said, calling for "more corn, more beef, everything we're capable of."

Farmers estimated they could increase their corn and wheat crops by at least 30 percent next year.

"The challenge is returning to the previous production levels, growing and adding value," said Dardo Chiesa, head of the Argentine Rural Confederations (CRA).

The conservative president's pledge to let the peso currency float freely, a move that will likely trigger a steep devaluation, is also likely to boost Argentine exports by making them cheaper.

Exporters in both the industrial and agricultural sectors are pressuring for a devaluation.

At the official exchange rate, the Argentine peso is currently at less than 10 to the dollar, but on the black market, the rate is around 15 pesos to the dollar.


16 December, 2015