August 19, 2010

 

Argentine congress moves to cut corn, wheat export tax

Argentine opposition leaders said that they have support for a bill to eliminate corn and wheat export taxes to lure farmers away from the country's biggest crop, which is soy, and plant more cereals.

 

"We should totally cut duties on wheat and corn, which compete with soy and is a crop that distributes wealth more evenly. Soybeans invade everything because they are easier to produce and are more profitable," said Felipe Sola, an opposition lawmaker and former agriculture secretary.

 

Today, farm leaders marched on Congress to protest the current export tax regime, which levies wheat, corn and soy tariffs of 23%, 20% and 35%, respectively. The duty on Argentine soy should be modified so that smaller producers pay less, Sola said August 11.

 

Economy Minister Amado Boudou said lower taxes on agricultural shipments, which generate about 9% of government revenue, would mean fewer cash handouts for the poor and less spending on roads, schools and hospitals in Argentina. A reduction in the levies would be "hugely irresponsible," he said.

 

Export taxes "allowed the country to export not only agriculture but manufactured goods, substitute imports, generate jobs and strengthen the domestic market," Boudou said. The opposition "has a tremendous voracity to take money from the government, as if governments don't need funds to govern."

 

Today, wheat futures for December delivery rose for the first time in four sessions, gaining 1.4% to US$6.93 a bushel at 10:41 a.m. on the CBOT.

 

"Taxes on exports are distortive and don't encourage production in either the short- or long-term. Argentina is going to lose markets at the hands of competitors," said Christian Gribaudo, a congressman from the opposition PRO party and member of the agriculture committee.

 

Argentine farmers gathered a record 55 million tonnes of soy from their latest crop. The bumper harvest will help the economy grow 9.7% this year, Morgan Stanley said in an August 9 report. Boudou said growth will be 7%, after an increase of 0.9% last year.

 

"In the past six years alone, more than 9 million hectares that were used for cattle are now used for agriculture, mainly soy," Ambrosetti said. Government export restraints and domestic price controls that aim to ensure domestic beef, wheat and corn supplies, have encouraged farmers to plant more soy, nearly all of which are exported.

 

Former Economy Minister and ex-central bank President Roque Fernandez said that, in the longer term, the country should eliminate all export taxes.

 

According to the Juan Rey Kelly, an economist at the Argentine Rural Confederation, about 9% of the government's 229.1 billion pesos (US$58.3 billion) in tax revenue in the first seven months of the year came from farm export duties.

 

"Eliminating farm export taxes would help boost production and domestic demand, leading to increased payments of other taxes. The production of corn leads to a greater distribution of wealth than soy because it requires more manpower, agro-chemicals and transportation," added Sola.