Many of Argentina’s farmers are still reeling from a tax increase on crop exports that hit them late last year. Now, the government is set to deliver another duty blow as it taps the nation’s growing agriculture industry to try and deal with budget woes.
President Alberto Fernández plans to raise export levies on soybeans as it seeks to bridge its fiscal deficit, according to people familiar with the matter. The taxes will rise to 33 percent from the current rate of 30 percent, said the people, who asked not to be identified because the information isn’t public.
The move would mark the second increase in agricultural taxes since President Fernández took over just over two months ago. The policy reverses the bias favourable to the farmers of the previous administration. Argentina is the third largest producer of soybeans, the oilseed that is used to produce food for livestock and cooking oil.
A spokesman for the Ministry of Productive Development declined to comment on the possible tax increase, as did another from the Economy Ministry. A spokesman for the Agriculture Ministry did not immediately respond to an email seeking comment.
Fernández took office on December 10 in the midst of a serious economic crisis, and raising taxes on agricultural products was a way to help reduce Argentina's fiscal deficit, those with knowledge of the policy said. Vice-President, Cristina Fernández de Kirchner, is no stranger to unrest with producers. When her presidency ended in 2015, soy exports were subject to duties of up to 35 percent, with 20 percent corn and 23 percent on wheat.
Argentina is having difficulty raising cash with which to pay the lenders. The International Monetary Fund delivered Argentina a record credit line of US$56 billion, of which US$44 billion was eventually delivered. Fernández says that the country cannot meet its debt obligations if the economy does not grow. An IMF representative declined to comment.
Although the timing of the announcement is still unclear, Argentina has already temporarily suspended its export registration system, a measure that operators say indicates that change is imminent. Soy futures traded in Chicago reacted, registering gains of 0.4 percent on Wednesday, while corn and wheat prices fell.
The increase of three percentage points is expected to help fill the government's coffers with US$500 million, according to the expectations for the current harvest, estimated at approximately 53.1 million metric tons. The tax will be applied to soybeans that are currently harvested and to the inventory of the previous season that is currently stored in silos, people said.
Stocks of the previous crop are generally five million to seven million tons.