MercoPress. South Atlantic News Agency

Argentine gov't eyes soybean exports as a source of financing

Increasing export duties would be a result of the deal with the IMF

The government of Argentine Sunday decided to shut down all registrations for new soybean oil and soybean meal exports “until further notice,” it was announced. Authorities are also said to be planning a 2% rise to export taxes of industrial by-products, to level it up with the 33% charged to soybeans.

The administration of Alberto Fernández is reportedly evaluating the measure as a result of a price increase in global markets, it was reported.

“Having received the corresponding instructions from the Minister of Agriculture, Livestock and Fisheries, this Undersecretariat of Agricultural Markets informs the exporting sector of agricultural products included in the regime created by Law 21.453 that as from the date hereof and until further notice the Registration of Affidavits for Sales Abroad involving the export of the following tariff positions will be suspended to all effects,” says the official note signed by the Undersecretary Javier Preciado Patiño, which then outlines the tariff positions corresponding to soybean meal, soybean oil, and other by-products.

Soybean beans pay a 33% export tax while its by-products, such as soybean meal and oil, pay 31%. This difference was originally grounded on the intention to encourage the export of products with higher added value. However, the industry has been speculating on the possibility of the government eliminating this gap.

Unlike wheat and corn, the impact of soybean price increases on domestic prices is much lower because the oilseed is virtually absent in the eating habits of Argentines, except as animal feed. As a result of the war in Ukraine, the ton shot above 600 dollars, reaching its highest value since 2012.

If the 2 point increase in soybean by-products is implemented, the government could increase revenues by US$ 400 million for a total of US$6.8 billion annually from export taxes per year, since it would be applied right at the beginning of the harvest. Soybeans, on the other hand, will continue to pay 33 percent. Its export is not closed.

The decision to close the registry is nearly tantamount to a confirmation that export taxes on these products will increase. The measure seeks to prevent exporters from rushing to register their sales abroad to freeze the current export duty.

Agriculture Minister Julián Domínguez had said in a press conference March 3 there would be no increase in export taxes.

As soon as the closing of the registry was known, the Argentine Chamber of the Oil Industry (CIARA) took for a fact the Government's decision and condemned it on Twitter: “It is totally contrary to Argentina's exporting interests. In addition to being illegal, it will affect foreign currency income and employment in the agro-industrial sector,” CIARA said.

The measure also “puts an end to corn, wheat and oil trusts, since it changes the foreign trade conditions,” CIARA went on.

Santa Fe Governor Omar Perotti and his Córdoba colleague Juan Schiaretti also came out against the national government's decision. The two provinces are large soybean producers.

“The suspension of soybean meal and oil exports will stop the entry of foreign currency needed by the country. We must be careful with encouraging deindustrialization. What we need is to add value, generate jobs and achieve investments,” Perotti said on Twitter.

The restrictions to exports come in the aftermath of the agreement with the International Monetary Fund, which is yet to be approved by the national Senate after it was greenlighted by the Lower House.

Alberto Fernández's government had already increased export duties from 26 to 33% for agricultural products, except for soybean oil, flour, or pellets, for which it set a differential 31% rate. In the event of a readjustment, it could converge to the 33% paid by soybeans.

Members of Economy Minister Martín Guzmán's team have been reported to favor the increase of export duties in order to uncouple domestic prices from global ups and downs.

The price of food in Argentina has gone up 4.9% and 4.3% percent in December and January, respectively; above general inflation indexes.