March 20, 2009

Argentine President Cristina Fernandez announced a major change Thursday (March 19) to the way the government treats its highly contentious soy export duties, detailing plans to partially share them with provincial governments.

Speaking a presentation at the presidential residence in Olivos, Fernandez said the plan to share the 35 percent tax on soy exports would be introduced via an emergency decree that she would soon sign. In this way, the measure, which will require the establishment of a special fund, will avoid the need for congressional approval.

In the way that the fund will be managed, soy export taxes will in effect become part of Argentina's co-participation tax regime, which sets aside 30 percent of all federal government revenue on a range of tax categories for provinces. Up until now, all export duties - on various grains and other commodities as well as on crude oil and fuel - had been exempt from this system, which mostly affects items such as income tax and value-added tax.

The president said the government would impose one condition on the tax-sharing, however, stating that provinces would be required to invest the funds in infrastructure.

Separately, Fernandez said the government had achieved a primary fiscal surplus of 1.6 billion pesos (US$439 million) in February.