While it remains unclear who will win Sunday’s presidential election in Argentina, one thing is already decided: farmers are poised to benefit as both leading candidates plan to eliminate wheat and corn export taxes and cut a soybean levy.
Wheat and corn taxes should be cut "immediately" while the 35 percent soybean export levy should be reduced to 20 percent, Miguel Bein, main economic adviser to leading presidential candidate Daniel Scioli, said Wednesday in a report posted on his consulting firm’s website. Mauricio Macri, Scioli’s main contender according to local polls, has previously said he would eliminate corn and wheat taxes while cutting the soybean levy by 5 percent a year.
President Cristina Fernandez de Kirchner, who can’t run for a third consecutive term, has clashed with farmers since gaining office in 2007 when she unsuccessfully tried to raise the soybean tax to 45 percent. That ignited 129 days of strikes, road blocks and food shortages across the country until July 2008 when then Vice President Julio Cobos voted against the increase. Soybeans support a third of government spending.
Argentine farmers have exported $17 billion of grains and oilseed this year, the lowest for the period since 2007, according to exporters’ consortium data, as they wait for a change of government. In 2014, they sold a record $24.1 billion of grains and oilseed to boost central bank reserves.
“By stimulating the export of soybeans stored by farmers we would accelerate the injection of dollars into the Central Bank without issuing debt,” Bein says in the report. He estimates that farmers are hoarding as many as 22 million metric tons of soybeans, about one third of last season’s record crop, or $7.4 billion worth of oilseeds.
Argentina, the world’s third-largest grower of the oilseed after the U.S. and Brazil, is the world’s largest exporter of soybean oil and derivatives, used in soy milk, tofu and animal feed.
Cutting export tariffs will help the next Argentine government rebuild its depleted foreign reserves, which at $27.4 billion are near a nine-year low, the report said. Higher reserves would allow Argentina to negotiate from a stronger position with holdouts from the 2001 default.
Argentina defaulted last year for a second time in 13 years after Fernandez defied a New York court order requiring the country to repay disgruntled creditors.
Scioli is within a fraction of winning the presidency in the first round of elections to be held Sunday. He had 39.7 percent of intended votes against 28.8 percent for Macri, according to the average of four polls viewed by Bloomberg. Scioli would need to exceed 40 percent and have a 10 percentage point lead over the second-place candidate to avoid the first run-off in Argentina’s history.