CHICAGO, Ill. — One of the frontrunners in Argentina’s presidential election campaign is promising to reform the country’s export tax on crops.
Sergio Massa, head of the Front for Renewal party, says he would eliminate taxes on wheat, reduce the duty on corn and sunflowers and gradually decrease the tax on soybeans.
It would have a profound impact on the competitiveness of Argentina’s grain and oilseed exports, said an expert in the field.
“Export taxes are really a potential game changer,” Yelto Zimmer, director of the Thuenen Institute for Economics, told the DTN 2014 Ag Summit.
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What Massa is proposing would be a big departure from the policies of existing leftist president Cristina Fernandez, who is barred by law from a third term.
Her government charges farmers an export tax of 35 percent for soybeans, 20 percent for corn and 22 percent for wheat.
The tax is a major source of revenue for a government that is in financial turmoil.
Zimmer, who studies production and transportation costs of farm operations around the world, said growers in Brazil and the United States better pray the government doesn’t remove the tax.
“It would massively improve the competitive positions of Argentina’s growers,” he said.
Argentina is already more cost competitive than other corn and soybean exporters to many destinations. Removing the export tax would make the country hands-down the cheapest supplier.
However, a South American grain expert said it will never happen, despite the promises being made by politicians in advance of the Oct. 25 election.
“There is absolutely no prospect of that whatsoever,” said Alastair Stewart, DTN’s South American correspondent.
Argentina is in serious financial trouble and has recently been in default on foreign debt. The government desperately needs all the tax money it can raise.
“Getting rid of the most reliable source of revenue for the government is not the first step you make when you’re trying to stabilize the economy,” said Stewart in an interview at the DTN conference.
The current tax regime encourages soybean production because corn and wheat face export quota restrictions in addition to export taxes. Soybeans, by contrast, can be freely traded, which appeals to growers, especially when the economy is struggling.
“It’s quite smart, actually, because what happens is that (the government) basically creates a situation that induces everybody to plant soybeans and then taxes (the crop) heavily,” said Stewart.
He isn’t convinced eliminating the export tax would significantly affect world trade even if the government got rid of it at some point.
Stewart thinks any benefit from reduced taxes would be eaten up by higher land costs as farming in Argentina became more profitable.
sean.pratt@producer.com
