Monday, June 11, 2018

Fight Rejoined Over Soya Export Tax in Argentina

It baffles me how long this has been going on: In May of last year, I posted about Argentina's efforts to keep the local market well-supplied with soybeans as farmers preferred selling to export markets given the prevailing high prices of commodities. Fast-forward nearly a year and things are rather different as soybean prices have fallen markedly alongside those of other commodities (see chart). Plus, a continuing drought is worsening prospects down on the farm. Now Argentinean farmers are unhappy that, despite the fall in soya's price and hence the original justification given by Argentinean President Cristina Fernandez-Kirchner, the export tax remains in place. Worse, a revenue-starved government (attributable to the fall in commodity prices) has just said that it would send tax proceeds to local governments--not a popular move, to say the least. Like before, farmers have blocked streets to stop the transport of soya and mounted roving strikes. From Reuters:
Argentine farmers blocked roads and called an anti-government strike [for a week] on Friday, reigniting a year-long standoff over soy taxes and challenging the president three months before a mid-term vote. The protests erupted a day after ruling party lawmakers refused to debate an opposition-led bill to cut the taxes, further dimming prospects of a quick resolution to a conflict that has weakened President Cristina Fernandez.

Her cash-strapped government is battling to retain some $4.9 billion in tax revenue from soy exports in the run-up to the congressional vote, which is expected in June.
"A great opportunity was lost yesterday," said Mario Llambias, president of the Argentine Rural Confederations, one of the country's four main farming groups, as he called the seven-day freeze on grains and livestock sales from Saturday.

Fernandez further riled farmers in the agricultural powerhouse with an announcement that revenue from the levies would be shared with provincial governments. "We've gone back to the 2008 situation," said Alfredo de Angeli, the outspoken leader of a local FAA branch, who was arrested by military police last year when he blocked the same highway in the eastern province of Entre Rios.

Protesters stopped traffic by parking tractors on several highways in the fertile Pampas region, some burning tires in scenes reminiscent of last year, when blockades caused sporadic food shortages and sent local financial markets tumbling. Friday's protests pushed U.S. soy futures and local livestock prices higher, while the peso and Argentine bonds fell. Mario Balletto, a Citigroup analyst in Chicago, said "seven days will not cause too much excitement but the uncertainty that it could become longer would be supportive" for prices.

Fernandez has refused to lower the tax on soybeans from the current rate of 35 percent, even as global prices have slid 40 percent from last year's record high and a severe drought has slashed corn and wheat production. She defends the levies as a way to share wealth in a country where roughly one in four people lives in poverty.

Soy is Argentina's top crop and income from taxes on soybeans, oil and meal has become more important for the government as the economy slows after years of robust growth...the farming conflict is leading major soy buyers like China to look to the United States and Brazil for supplies, industry analysts said.

The current grains harvest, valued at about $17 billion, is expected to earn the government $5.6 billion in export levies, the vast majority from soy, according to a recent estimate by the Argentine Rural Society.
Aren't Peronist politics supposed to be populist? You don't hear of counterprotests.

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