Government mulls temporary cut on some crop export taxes

Argentina's government is weighing a temporary reduction on some export taxes to boost dollar inflows as its foreign reserves fall to a three-year low, according to people with knowledge of the matter.

Officials are still discussing which products will be considered in the measure, the percentage of the tax reduction, and how it will apply, said one of the people, who asked not to be named because the talks are private. Measures may be announced for soy as soon as Wednesday and could apply in the month of October, another person said.

An Economy Ministry spokesman did not respond to a request for comment.

Soy exports are seen as a key element in measures to shore up the peso, the world's worst performing currency in the past five years on a spot yield basis. In 2019, for example, soybean shipments reached a value of US$17.9 billion, or 27 percent of Argentina's total sales abroad.

Local farmers have been holding back the soybean trade with exporters because the official rate is overvalued, and up until September 16, they still had to sell or price the contracts for 52 percent of the harvest that ended in June. Soybeans and soybean meal have rebounded strongly in recent weeks, so there is an opportunity to bring in more dollars with shipments.

The country extended capital controls on September 15, in an attempt to conserve US dollars as reserves dwindled. The measure was unsuccessful: reserves continued to shrink and the difference between the country's official and parallel exchange rate widened as Argentines turned to the greenback to maintain the value of their savings. The estimated net reserves are US$4.6 billion, according to Portfolio Personal Inversiones.

– BLOOMBERG