Economy Minister Martín Guzmán announced Thursday that the government will reduce export taxes on several key commodities over the next three months, in an effort to boost dollar inflows to the country as Central Bank reserves continue to decline.
The reductions, which will take place over a period of three months, will affect the country’s agricultural, industrial and mining sectors and seek to encourage sales, the minister said.
"It seeks to strengthen the external front, it seeks to strengthen the country's international reserves, in order to generate greater stability that allow us to have a more conducive environment to generate employment, for production and for development in general," said Guzmán, introducing the announcements.
For soybeans, Argentina's main export, levies will fall from the current 33 percent to 30% percent in October, rising to 31.5 percent in November and 32 percent in December, before rising again to 33 percent in January before the harvest, Guzmán said at a press conference.
The temporary reductions, at different levels, will also benefit soybean oil and flour, biodiesel, mining products, and final goods and industrial inputs.
"It seeks to strengthen the external front, international reserves," said Guzmán.
Argentina's gross international reserves currently stand at just over US$41 billion, but analysts estimate liquid reserves to be as low as US$5 billion. Gross reserves have fallen by more than US$11 billion in the last year, accelerating in recent months despite the tightening of currency controls.
With Argentine savers withdrawing their dollar deposits from banks, total reserves fell US$370 million to US$41.4 billion on Wednesday, the lowest level since January 2017.
According to industry sources, three percent less soy has been sold so far than the previous year. It is estimated that 17 million tons of soy are in the hands of producers, with more than US$10 billion.
With regard to mining, export taxes will be reduced from 12 percent to eight percent.
For industry, export duties are to be lowered for final industrial goods to zero percent, wth processed goods at three percent. Automobile exports will receive incentives for non-Mercosur business. A host of financial incentives are also being deployed to encourage construction projects to start, said officials.
The government hopes that with the new tax incentives will boost sales and pave the way for foreign currency to enter Argentina.
Minister Guzmán reiterated several times on Thursday that the measures were “defensive” and “temporary.”
"Exchange regulations are measures that are not structural, which is not what we are aiming for on the horizon. They are defensive measures. Now we are trying to stop the fall in reserves and then to strengthen them," he said.
"We are all in the same boat, putting Argentina on its feet requires that we all go in the same direction," Guzmán concluded.
The minister also said that the Central Bank has the option of resorting to its US$19-billion currency swap line with China, although that decision would be evaluated later.
He said there will be no new exchange controls implemented on Thursday, just two weeks after the Central Bank implemented stricter currency controls.
Argentina has been in recession since 2018, and its economy has been hit hard by the Covid-19 pandemic. Gross Domestic Product will suffer a 9.9 percent contraction this year, according to estimates by the International Monetary Fund, though experts expect a sharper contraction.
Guzmán also confirmed Thursday during a television interview that an International Monetary Fund (IMF) mission team would be visiting Argentina in October and November. The two sides are looking to negotiate a new financing programme for the record US$57-billion bailout granted to the Mauricio Macri administration in 2018.