Argentine farmers face agricultural policy reform after Peronist victory

Sunday's election, which brought Peronist parties back into government in Argentina after a four-year hiatus, has traders and farmers preparing for a return to export taxes as the country struggles for foreign currency reserves.

In a widely expected result, Frente de Todos' Alberto Fernandez defeated center-right President Mauricio Macri in the polls, winning 48% of the votes to 40.5%, with the remaining 6.2% raised. by independent candidate Roberto Lavagne.

By attracting more than 45% of votes, the result means that Fernandez will avoid a run-off between the two main candidates and will take office in the Casa Rosada on December 10.

However, his support was lower than the 15 percentage points indicated by opinion polls.

And although he attracted support in the province of Buenos Aires, which is the largest province in terms of agricultural production, Fernandez received fewer votes than Macri in other important agricultural provinces, such as Córdoba, Santa Fe and Entre Rios.

To support the crumpled peso, which has lost 50% of its value this year, the Central Bank of Argentina on Monday limited citizens' purchase of dollars to US $ 200 per month.

While this will not affect foreign trade, the business community already fears a potential return to the restrictive export and agricultural market interventionist policies that were widely adopted by Peronists from 2008 to 2015.

While a return to higher export taxes is seen as certain, a greater fear is the imposition of export quotas or even limits on land ownership to appease a voter base that favored the redistribution of wealth.

In fact, earlier this year, legislator Felipe Sola, from Frente de Todos, had called for interventionist measures in the domestic wheat market to regulate the domestic price of bread.

Juan Grabois, a social leader with very close ties to the Frente de Todos coalition, recently suggested that the next government should limit land ownership to 5,000 hectares.

With inflation at a high of 55% this year and given the need to attract foreign reserves, few analysts expect quotas and land restrictions so soon in government.

Meanwhile, the prospect of a dual exchange rate will almost certainly become increasingly apparent, with one for financial markets and a lower rate for trade to ensure farmers are competitive.

Tax hike

“The new government is likely to increase export taxes. No one in the world will give them even a single coin as a loan, so they will have to look for a way to get money to finance public expenses. I think they will increase export taxes on cereals and oilseeds,” said a market source.

Current taxes on cereals are 4 pesos per good exported – about 7%.

Additionally, exports of soybeans, soybean oil and soybean meal attract a fixed fee of 18%, bringing the total to 25%.

Some market participants now expect these rates to rise to 20% for cereals and 30% for oilseeds and their derivatives – close to the 23% and 20% that were in force at the end of the last Peronist government.

While others are less pessimistic, a less costly grain increase is expected around 10%.

If taxes reach the higher end of these estimates, analysts at the Buenos Aires Grain Exchange predict that grain production will fall by 5.6%, with exports falling by 14.4%.

This compares to overall grain production in 2019/20, estimated at 131.7 million tonnes, a drop of 3% on the previous year's volume.

 

Source: AgriCensus
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