BLOOMBERG
07/11/2007
Argentina said it increased taxes on exports of soybeans, corn and wheat to boost government revenue from surging crop prices and limit domestic food inflation.
Taxes on soybeans, the nation's biggest export crop, jumped to 35 percent from 27.5 percent, Economy Minister Miguel Peirano said today in a news conference in Buenos Aires. The levy on corn rose to 25 percent from 20 percent, and wheat now is taxed at 28 percent, up from 20 percent, he said.
Argentina, the world's second-largest corn exporter after the U.S., had limited exports of some crops after a surge in global prices led farmers to increase shipments, reducing local supply. Soybean prices in Chicago have gained 59 percent in the past year to the highest since 2004. Wheat reached a record high last month, and corn is up 9.5 percent from a year ago.
``These measures will generate price stability, growth in investments and economic expansion,'' Peirano said during a televised press conference at the Presidential Palace.
Increasing the cost of exports also is designed to reduce domestic inflation, Peirano said. Argentina's government implements price controls on fuel and some foodstuffs and limits exports to ensure sufficient supply in the local market.
The new tax regime took effect immediately. The government temporarily closed a register for soybean exporters to declare future sales of this year's crop, according to today's official gazette. The register for corn and wheat exports remains closed.
`Government's Party'
Argentina's government earned $4.5 billion in revenue from agricultural commodities in the 2006-2007 crop year, more than any other industry, according to Sociedad Rural, the country's biggest farm group.
``The agriculture sector keeps paying for the government's party, paying for the increase in government spending,'' said Alberto Gallo Llorente, a member of the Confederation of Rural Associations of Buenos Aires and La Pampa, which represents 34,000 farmers.
The Sociedad Rural and other farming associations demanded an ``urgent'' meeting with Cristina Fernandez de Kirchner, who will succeed her husband as Argentina's president after being elected on Oct. 28. The new taxes jeopardize economic growth in provincial areas, the groups said.
Government spending rose about 54 percent in the first nine months of this year to 87.8 billion pesos ($28 billion), including investment in public works, increases in civil servants' paychecks and funding for social security, according to the Economy Ministry.
Higher export taxes will limit domestic price gains, hurting mostly small-scale farmers who are paying more for fuel and fertilizers to plant their crops, said Eduardo Buzzi, president of the Argentine Agriculture Federation.
`Adequate Profitability'
Peirano said the increased export taxes ensure ``adequate profitability'' for farmers.
The government imposed taxes of 10 percent on crops and 5 percent on livestock feed in 2002 to help the country recover from its worst economic crisis ever. Processors crush soybeans to make animal feed and vegetable oil.
Soybean farmers have planted about 16 percent of an estimated record crop of 16.8 million hectares, the Buenos Aires Cereals Exchange said Nov. 2. The soybean crop, which is harvested between March and April, may reach a record 50 million metric tons in the current crop year, said Thomas Hinrichsen, who runs J.J. Hinrichsen, Argentina's biggest grains brokerage.
Farmers finished planting wheat and may increase their harvest by 7 percent to 15.2 million metric tons in the current crop year.
Argentina is the third-biggest soybean exporter after the U.S. and Brazil, and the country was the world's fifth-largest wheat exporter last year, according to the U.S. Department of Agriculture.
