Milei stumbles in bid to unchain farmers as soy tax break ends

President Javier Milei’s vow to unleash Argentina’s beleaguered farmers is faltering after a decision to raise taxes on soy exports by about seven percentage points.

The libertarian swept to power in late 2023 promising to bring the full force of free markets to an economy floundering under government meddling. It was welcome news to farmers hampered for years by the interventions, in particular a rare habit of taxing their exports. For traders dealing in South America, that relegated Argentina to a mere side note as Brazil embarked on a relentless crop boom.

Disappointment set in on Tuesday, however, as Economy Minister Luis Caputo announced that a tax cut for exports of soy and corn will end as planned. Farmers on the Pampas growing belt had hoped, even expected, that the cut would be extended. But in July the tariff for soy meal and oil will go back to 31 percent from the current 24.5 percent. And for soybeans, the rate returns to 33 percent from 26 percent. 

In a signal of goodwill, Caputo said the temporary reductions will be prolonged for the next round of wheat and barley. But these crops are generally worth much less to farmers.

Caputo and Milei have been clear that the government’s top priority is consistent budget surpluses after years of deficits that they see as the root cause of Argentina’s economic woes. For now – despite the President’s campaign pledge – they can’t achieve that goal without the billions of dollars of annual revenue from taxing crop exports.

Farming associations that had already been clamoring for the tariffs to be scrapped doubled down on the message after Caputo’s announcement.

“The reality is that we need the taxes on exports – which is the worst kind of tax – to be removed definitively,” Andrea Sarnari, president of the Federación Agraria Argentina that represents small-scale farmers, told reporters.

Ending tariff relief on soy and corn is another blow to farmers grappling with low global prices and struggling to turn a profit. The sector has also been hit by heavy rains, which risk some losses in fields that still need to be harvested or to production stored in silo bags.

Separately, another part of Milei’s vision to turbocharge Argentina’s crop shipments – already worth some US$30 billion a year – suffered a setback in February when an auction for a contract to deepen the Paraná River was cancelled after drawing just one bid.

Still, farmers continue to support Milei, recognising several favourable policies that he has been able to implement, like ditching export quotas and starting to unify multiple currency rates. More than anything, they strongly identify with his free-market spirit.

“I don’t see it as Milei not fulfilling” his promise, said Javier Mariscotti, a grains broker in Rosario, Argentina’s crop-export hub. “It’s more like a debt that still needs to be settled. Let’s give him more leeway.”

Javier Preciado Patiño, a farming consultant who served as Argentina’s head of agriculture markets from 2019 to 2022, said Milei may bring soy taxes down again later in the year, perhaps in a bid to woo rural voters ahead of provincial and midterm elections or if he sees that farmers are withholding sales to exporters. “Those two factors will be key,” he said.