The
administration under Argentine President Mauricio Macri is expected
to announce export taxes on corn and soy
Argentine
authorities are expected to announce on Monday additional measures
that President Mauricio Macri hopes will end the country’s economic
downward spiraling, including increasing farm export taxes.
Treasury
Minister Nicolas Dujovne said he’ll announce measures on Monday to
reduce Argentina’s 2019 primary deficit - its borrowing needs
before debt servicing - in an effort to stem the peso’s three-month
double devaluation from 20 to over 41 percent of the dollar.
It’s
expected that the administration will increase its tax on soy and
corn exports, at a yet disclosed amount, in order to cut its primary
deficit to 1.3 percent of gross domestic product (GDP) as part of an
International Monetary Fund (IMF) deal agreed upon in June.
President
Macri had to plea to the IMF heads for an emergency advance on its
US$50 billion loans from the fund last week as the peso bottomed out
at 41 percent, some 16 percent lower than the previous week. The IMF
has already distributed some US$15 billion of the three-year loan to
the Argentine Central Bank.
The new
policies, which may also include shrinking about 10 ministries,
including the Agroindustry Ministry, and the June loan are meant to
allay international investor fears regarding Latin America’s
third-largest economy.
Jeffrey
Lamoreaux, senior analyst at Fitch Solutions in New York said that
investors want to see further primary deficit cuts and are hoping for
a combination of agricultural export taxes and reductions in
subsidies and social spending in order to meet next years deficit
goal.
Each
month of 2018 has seen over 4,300 job layoffs, half of which have
been in the public sector. Since Macri took office in 2015 and last
July more than 73,800 jobs, both private and public, have been lost,
according to the Observatory of Foreign Trade, Production and
Employment (CEPE).
The
agricultural sector has been Macri’s biggest proponent. The
powerful farm lobby backed his business-friendly platform in both the
2015 presidential elections and the 2017 mid-term legislative
elections.
A return
of export taxes would mark a major reversal. Macri eliminated corn
and wheat export taxes shortly after taking office. He also began
gradually lowering taxes on soy and soy products last May by a half a
percent, according to Reuters. Argentina is the world’s third
largest raw soybean exporter and first in soybean meal and oil.
Two
former economic officials in Macri's government suggested export
taxes are short-sighted and ineffective.
"I
never believed in that measure as a permanent option but this is a
fire," Carlos Melconian, who served as chief of state-run
Banco Nacion during the first year of Macri's term.
Luciano
Cohan, the former undersecretary for macroeconomic programming under
Macri, tweeted that a 5 percent export tax on all goods, not just
agricultural products, would raise between $3.5 billion and $4
billion in revenue next year.
A
spokesman for Argentina's Agriculture Ministry said he did not have
information on any plans for export taxes. A Treasury Ministry
spokesman did not respond to a request for comment from Reuters.
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