Sunday, June 23, 2024

ECONOMY | 07-09-2022 17:21

Soy exporters race to exploit new ‘soy dollar’ exchange rate

More than two million tons cashed in the first two days of Sergio Massa’s new scheme to boost Central Bank reserves.

Agricultural producers have rapidly taken advantage of a special exchange rate designed to incentivise exports, shore up Central Bank reserves and avoid a currency devaluation. 

The new rate of 200 pesos for soy dollars got off to a strong start this week with over two million tons already cashed in the first two days of the government’s new ‘Programa de Incremento Exportador.’

According to the Rosario Grain Exchange, many of the transactions were contracted ahead of the mechanism being formally set up.

Tuesday’s volume “topped Monday by 68 percent, taking the total of registered soy deals up to 2.13 million tons in just two days,” reported the grain exchange.

“The average value of these contracts was 69,534 pesos per ton, three percent down from Monday and down from previous transactions with an average value of 70,447 pesos per ton,” it added.

The government, which was reported to be pleasantly surprised by the success of the new measure, has set a target of US$5 billion of soy export sales. It wants to reinforce the meagre reserves of the Central Bank with Economy Minister Sergio Massa (in the United States since the start of the week) claiming that this figure had been agreed with the country’s main grain exporters in exchange for 200 pesos per dollar, as against an unattractive official exchange rate of around 145 pesos, around half of the parallel equivalents.

Argentina’s government charges a 33 percent tax on soy exports, making it a major source of tax revenue and dollars for reserves. 

A gap between Argentina’s official and parallel exchange rates has led exporters of all types to withhold some shipments, waiting for a major devaluation to export at a more profitable rate. Conversely, importers have moved shipments forward to take advantage of a relatively low official rate. 

In announcing the new programme last Sunday, which improves the terms from a similar scheme running in August, Massa said that it would be limited to this month. Some US$3.2 billion were cashed throughout last month, according to authorities, with just US$650 million coming from soy exports.

This measure “allows us to strengthen reserves, which is essential to overcome the stress that the economy has been suffering,” Massa said at a press conference attended by more than a dozen agriculture business leaders. 

Soy-based exports (including flour and oil) account for total annual sales of some US$40 billion, of which the government nets at least US$10 billion.

Gross foreign currency reserves amount to around US$39 billion but some analysts estimate that the net figure could even be in negative territory as the government struggles to boost reserves in line with its agreement with the International Monetary Fund (IMF) that reschedules a debt of US$44.5 billion. 

Under the same agreement the government has pledged to reduce the fiscal deficit to 2.5 percent of gross domestic product, 1.9 percent in 2023 and 0.9 percent in 2024.

The economy posted 6.3 percent growth for the first half of the year but inflation had already reached an alarming 46.2 percent by July, eroding purchasing-power.



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