Mar 09, 2020
Soy Producers and Processors in Argentina Upset over Higher Taxes
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Last week, the Argentine government increased the export tax on soybeans, soybean meal, and soybean oil from 30% to 33%. The tax increase was widely expected when the government closed new export registrations two weeks ago.
Prior to the tax increase, the Rural Confederation of Argentina (CRA) threatened a strike by its members if the export tax was increased and they are followed through with that threat by conducting a 4-day commercial strike this week. Four major farm organizations joined with CRA in conducting the strike during which farmers will not sell any of their products. The economic impact of such a strike is unclear.
The soybean processors in Argentina are also upset about the tax increase. The Vegetable Oil Industry Association in Argentina (Ciara) is upset because there will now be a 33% export tax on soybeans as well as soybean meal and soybean oil. They contend that the products are more expensive to produce so they should be taxed at a lower rate than raw soybeans. In the past, the tax on meal and oil was generally 3% less than on soybeans, which was a built in profit margin for the crushers.
In fact, when export taxes were initiated in Argentina more than 20 years ago, the tax differential between the raw soybeans and the products was a big incentive to process soybeans instead of exporting raw soybeans. At the time, some crushers in southern Brazil moved their operations to Argentina because of the tax differential. The incentives worked and now Argentina is the largest exporter of soybean meal and soybean oil.
An increase in the export tax was seen by the government as the easiest way to increase desperately needed government revenue in order to service their debts. It remains an open question how the country will resolve its debt crisis or if Argentina will default. The Argentine economy is in dire shape with high inflation, a devalued currency, a growing recession, general unemployment, and increasing poverty.