Argentine president eliminates export taxes on corn, wheat and meat products

Argentina said on Wednesday it was lifting its currency controls and would allow the peso to float when markets open, setting the stage for a sharp devaluation, following vows by new President Mauricio Macri for reforms to spur economic growth.

Kirchner had introduced steep taxes on the South American farming giant’s agricultural industry in 2008, triggering angry protests by producers.

Argentinian farmers will soon breathe a sigh of relief, as the government aims to drop taxes on the export of agricultural commodities, though the move is raising fears that a flood of products on the market will push worldwide prices even further.

Argentine farmers have been hoarding their crops in hopes of more favorable conditions.

Now exports on wheat and corn are set at rates as high as 23 percent. The tax agency, known as AFIP, estimates that as much as $11.4 billion of soy, corn and wheat are being held by farmers waiting to be sold.

Argentina, the world’s largest exporter of soybean derivatives, has shipped $17.9 billion of grains and oilseeds overseas this year, the lowest for the period since 2009, according to data compiled by exporters. “We need to export fewer cereal crops and export more goods with added value”.

Argentina’s Finance Minister Alfonso Prat-Gay announces plans to lift restrictions on buying US dollars in Buenos Aires, Argentina, Wednesday, Dec. 16, 2015.

Argentines have long seen the dollar as a safe haven, in a country where inflation has been a historic bugbear of the economy.

Attempting to shore up dwindling foreign currency reserves, the preceding administration of President Cristina Fernandez instituted restrictions on buying foreign currency in 2011.

Agricultural exports are expected to total US$25 billion (RM108 billion) this year, a third of Argentina’s total exports.

The government said that revenues lost from cutting export taxes would be recuperated through other taxes, such as those on profits, which it said should increase as farm production grows. Argentines who want to exchange pesos for dollars under the current system have to document where they got the money, and can only buy up to $2,000 a month.

Exporters in both the industrial and agricultural sectors are pressing for a devaluation.

But for much more money to come in, economists say the agricultural changes must be coupled with deeper, across-the-board reforms, such as eliminating restrictions on buying USA dollars that has created a booming black market.