Argentina applies tax hike on bio-diesel exports and lowers price for local market
Argentina tightened its grip on the country's energy sector on Friday by ordering a tax hike on bio-diesel exports, a move it said was needed to make domestic fuel prices more affordable, but denied market rumours that it will increase a soybean export tax.
Argentina is the world's biggest exporter of bio-diesel, a fuel made from soybean oil. The tax which will go to 32% from 20% becomes effective Saturday, according to a government decree.
The European Union is by far the biggest market for Argentina, which shipped a total of almost 900,000 tons of Bio-diesel in the first half of 2012, generated some 1.03 billion dollars, according to industry data.
Government economist Axel Kicillof, who burst onto the national stage when he became the public face of Argentina's nationalization of energy company YPF in April, justified the tax hike by saying that Argentines are paying more for bio-diesel than are foreign buyers.
This will reduce the domestic price of bio-diesel, he told reporters.
Also on Friday the government issued a decree lowering the official price of domestic bio-diesel by 15% to 4.405 Pesos (96 US cents) per ton from 5.195.8 Pesos.
Argentine bio-diesel production in 2011 was 2.4 million tons, of which 1.7 million was exported for about 2.1bn. The country plans to reach 4.5 million tons of annual production by 2013.
Argentine bio-fuels refiners had hoped President Cristina Fernandez would soon raise the compulsory blend requirement for diesel sold domestically to 10% from the current 7% as a way to boost local demand.
But Kicillof dashed that idea during his comments to reporters. He also dismissed rumors that the government was mulling an increase of export taxes on soybeans, which is currently set at 35%.
This is a better measure than ones that would increase soy export taxes. This is a better way to go, said Kicillof
Due to the lower than expected soybean crop caused by a drought that hit the fields during the growing season and has left the crushing companies with idle capacity, the government on Friday also lifted a ban on soybean imports, which will now be available to help keep Argentine crushing plants busy.