MercoPress. South Atlantic News Agency

Argentina hikes export taxes on soybeans and cereals

Farmers have a growing partner pinching their pockets

Amid protests from farmers' organizations, Argentina increased taxes on exports of soybeans, corn and wheat an average of five percentage points to boost government revenue from surging crop prices and limit domestic food inflation.

Export levies on soybeans, Argentina's biggest export crop jumped to 35% from 27.5%; corn from 20 to 25%; wheat from 20 to 28% and oil from 8 to 10%, said Economy Minister Miguel Peirano during a press conference Wednesday afternoon. Argentina limited exports of some crops after a surge in global prices led farmers to increase shipments, reducing local supply. Soybean, wheat and corn prices for different reasons have reached record prices in international markets. Argentina is a global leading exporter in cereals and oil. "These measures will generate price stability, growth in investments and economic expansion" said Peirano adding that increasing the cost of exports also is designed to reduce domestic inflation. Argentina's government implements price controls on fuel and some food items and limits exports to ensure sufficient supply in the local market. The new tax regime took effect immediately. The government also temporarily closed a register for soybean exporters to declare future sales of this year's crop. The register for corn and wheat exports remains closed. Argentina's government earned 5 billion US dollars in revenue from agricultural commodities in the 2006-2007 crops year, more than any other industry according to the Rural Society, the country's biggest farm group. "The agriculture sector keeps paying for the government's party, paying for the increase in government spending'' complained Alberto Gallo Llorente, a member of the Confederation of Rural Associations of Buenos Aires and La Pampa, which represents 34,000 farmers. Ahead of the October 28 presidential election, the Kirchner administration increased spending about 54% in the first nine months of this year to 87.8 billion pesos (approximately 28 billion US dollars), including investment in public works, increases in civil servants' paychecks and funding for social security, according to official figures from the Ministry of Economy. Higher export taxes will limit domestic price gains, hurting mostly small-scale farmers who are paying more for fuel and fertilizers to plant their crops, said Eduardo Buzzi, President of the Argentine Agriculture Federation. Peirano said the increased export taxes ensure "adequate profitability" for farmers. "It's more of the same. We knew this was an electoral year and since now they need to balance the budget we have to pick up the bill", said SRA president Luciano Miguens. But this is a decision taken by an administration that is leaving "and we will try to establish a dialogue with the incoming authorities", he added. "What the government needs to understand is that we are facing a supply problem, not a prices problem, and taxing farmers will only worsen the situation in the mid term", said Miguens. "We have a fifty/fifty partner who runs with no risks". Export taxes on cereals and other commodities were imposed in 2002 to help Argentina overcome the melting of the economy in 2001/02, and have become together with the tax on checks one of the main sources of budget revenue. According to the US Department of Agriculture Argentina soybean crop, to be harvested next March/April could reach a new record above 50 million tons and similar conditions, given favorable weather conditions can be expected from wheat and corn. Argentina is the third-biggest soybean exporter after the U.S. and Brazil, and the world's fifth-largest wheat exporter last year.