Market News & Headlines >> Conservative Wins Argentina Election, Ag Reforms on the Way
Following conservative opposition leader Mauricio Macri’s victory in Sunday’s presidential run-off election in Argentina, significant reforms in that country’s agricultural policy are expected, which should boost production and exports of grains and other commodities.
The President-elect has promised to eliminate export taxes of 20-23% on corn and wheat, and remove government caps on exports of both grains. The reforms will make corn and wheat much more attractive planting options for producers and are expected to boost production and exports of both crops going forward.
Macri has also pledged to reduce Argentina’s 35% tax on soybean exports by 5% upon taking office and by an additional 5% each year he is in office. Along with an expected official devaluation of Argentina’s currency, the peso, the tax cut is expected to spur increased soybean exports starting this winter.
Macri is also considering suspending the export tax on soybeans completely for a 90-day period in an effort to spur farmers to sell-off their large stockpiles of soybeans, according to Bloomberg news, which cites two people with knowledge of the plan.
The 90-day window is one of the proposals being considered, said the second person aware of the plan. It’s being discussed by Macri’s financial team and lacks backing from the agriculture team, as it may hurt oil crushers and exporters while benefiting producers and the Central Bank. Macri has said previously that he would seek to remove Vanoli if he were elected president.
Even though soybean acreage is expected to fall in 2016-17 as producers switch back to planting corn and wheat after overplanting soybeans for many years, increased soybean profitability should encourage greater use of inputs and new seed technology, possibly leading to higher yields and maintaining high production levels.
Macri has promised to unwind government currency controls, including restrictions on the purchase of U.S. dollars. The head of Argentina’s central bank last week said that ending controls on currency purchases suggested a 50% devaluation of the Argentine peso, although he later backed off that statement. Alejandro Vanoli also vowed to stay on as central bank head. Macri has said he would seek to remove Vanoli if he is president.
Macri’s reform efforts will be complicated by the fact he will have to deal with a hostile Congress, however, he does not need legislative approval to remove the grain and soy export taxes.