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Argentina Expected to Increase Commodity Export Taxesqrcode

Nov. 5, 2019

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Nov. 5, 2019
On December 10th Argentina will inaugurate a new President, Alberto Fernandez, and a new vice President, Cristina Kirchner. Not much is known about President Elect Fernandez's potential future economic policies, but we know a lot about Vice President Kirchner's economic policies in the past when she was president for two terms and that is why the agricultural sector is very concerned.
 
President Elect Fernandez has not named any ministers or elaborated how he intends to pull Argentina back from the "economic abyss", but one change most observers are expecting is an increase in commodity export taxes. Currently, the tax on soybeans is 25% and that may increase to 30%. The current tax on corn and wheat is 7% and that may increase to 12%.
 
The president will have to control expenditures and increase government revenue and most people feel he will increase revenues by instituting higher export taxes probably starting on January 1, 2020. In the meantime, it is expected that farmers will be aggressive sellers of their grain in order to get ahead of the potential tax increases.
 
An increase in export taxes would probably help to stabilize the Argentine peso which is absolutely necessary if they have any hope of paying their debts and avoiding another default.
 
Another consequence of the election is that Argentine farmers may opt to switch some of their intended corn acreage to soybeans instead. Any future corn export tax will be less than the soybean export tax, but in the past, Mrs. Kirchner limited corn exports as a way to hold down on domestic food inflation. That resulted in very low domestic corn prices. Soybean exports were never limited, in fact they were encouraged as a way to generate more government revenue.
 
As a result, farmers in Argentina at one time planted approximately 6 times more hectares of soybeans than corn. During the 2018/19 growing season, the ratio had declined to about 3 times more hectares of corn than soybeans, but that trend may now start to be reversed.

Author: Michael Cordonnier
 

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