Argentine farmers balk at new grains export taxes, say output will suffer

23 January 20202 min reading

An increase in grains export taxes by the new Argentine government will weigh on exports as growers invest less to compensate for expected lower profits caused by the new levies.

Center-left Peronist Alberto Fernandez, who took office in December, boosted the tax rate for soybeans, soyoil and soymeal to 30% from about 25% and lifted the levy on corn and wheat to 12% from around 7%. The government needs money as it heads in to debt renegotiation talks over about $100 billion in obligations. Despite being the world’s No. 3 corn and soybean exporter, and its top supplier of soymeal livestock feed, Argentina’s economy has stalled, with inflation and poverty rising fast.

“To asphyxiate through higher taxes the most dynamic sector of the economy, and one of the few that has managed to continue growing through the crisis, will only have a fleeting impact on tax collection,” said a statement by groups representing Argentina’s soy, wheat and corn industries. “It will negatively affect production and employment, especially in the interior of the country,” the statement said.

A cut in Argentine farm output could mark a missed opportunity as commodities-hungry China looks for alternative suppliers to fill the gap left by the United States, which has seen its exports drop in a protracted trade war with Beijing.

Growers said higher taxes will prompt a fall in investment, particularly in crops that are relatively expensive to cultivate, like corn. “When profits fall, which is what happens when export taxes rise, farmers will produce less,” said Alvaro Tomas, a grower in the Pampas farm belt town of Carlos Casares.

Grains shipments are Argentina’s main source of much-needed export dollars. The central bank needs to sell dollar reserves to control the swooning peso, which lost more than 83% of its value over the previous four years. The weak peso has contributed to inflation of about 50% per year. “The increase in export taxes will be horrible for production, and that will trickle down to local rural economies felt by people who sell farm machinery, seeds and fertilizers. Later it will be felt in the national economy,” said David Hughes, a grower in Alberti, Buenos Aires province. Export taxes are paid to the government by international export companies that in turn discount the tax from prices paid to farmers. So growers end up paying the tax whether or not they are having a profitable year. REUTERS

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