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Argentina sees positive changes after years of struggle
Sep. 13, 2016
Argentina is a young democracy of only 30 years, presided over in the last 12 years by Nestor Kirchner (2003-2007) and Cristina Kirchner (2007-2015), both militants of the Peronist party (center-left). The government of Cristina Fernandez de Kirchner was characterized by an excessive increase in public expenditure, with redistribution goals and a closed economy focused on domestic consumption. In terms of the agricultural sector, it was an administration that was unlikely to seek consensus on the macroeconomic policies that boost production growth and was characterized by continuous clashes with the agricultural industry, an issue that resulted in a gradual change in production systems and crop rotation at Pampas.
Wheat-soybeans/soybeans/corn crops were rotated to reduce the amount of grasses in the planting area to minimal levels. Given the volatile nature of the economy in recent years, farmers have been choosing to plant fewer soybeans per hectare. In addition, the price of wheat (due to closed exports and no external market) and export tax on corn had dropped profit margins to almost zero or even showed losses in some cases. With regard to cattle, the sector suffered a strong drop in investment, reducing the country's overall productivity capacity.
The falling currency rate and unfavorable fiscal policy had slowly eroded competitiveness in the agriculture sector, leading local producers to neglect niche markets that required high added value inputs or the introduction of new biotechnology.
The current president, Mauricio Macri (neoliberal, center-right), won the presidential elections in December 2015 and has already adopted a set of measures that favor the sector.
These are the highlights of his policies:
1. Open the market to exports and eliminate trade bureaucracies.
2. Encourage competitiveness and transparency in the domestic market.
3. Reduce and eliminate export taxes on all grains and cereals and their by-products and on all meats.
4. Reduce the overall effective tax burden.
5. Expedite amortization of investments.
6. Simplify normative and tax regulations.
7. Prepare infrastructure for better production, competitiveness, and development, ensuring diversification and maximizing the transport matrix.
8. Adopt the National Law of Policy on Agribusiness Promotion.
9. In the beef sector, eliminate the export bureaucracy and export taxes on leather, as well as foster bilateral negotiations and quickly reduce fees for foraging, genetic testing, animal health, and supportive infrastructure, among other measures.
10. Create a slate dairy price with the participation of the private sector and host a public audit to ensure transparency in prices and the supply chain; permit industrial use of the raw materials.
11. Restore the National Registry of Rural Workers and Employers (RENATRE).
12. Adopt a new strategy for international economic relations, encouraging proactive access to and recovery of the markets.
13. Create the Ministry of Agribusiness.
After several years in the shadow of unfavorable policies, a new era is beginning in Argentina, where politicians are addressing the farmers’ problems by promoting investment in the sector. The margins of crops have started becoming attractive again, and a change in the mentality of producers can be seen as they return to growing corn and wheat in their rotation schedule. There has also been a notable change in the demand for inputs with high added value. Several foreign companies have already entered the country to work in the production and biotechnology sectors to take advantage of these favorable conditions in an otherwise not so favorable global context.
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