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Farming Sector on its Toes as Rumors Ensue about Government Suspending Reduction of Taxes on Exports

By | [email protected] | May 24, 2018 12:34pm

Luis Etchevehere

After the economic turbulence the country has undergone in recent weeks, the government began to analyze different ways to further reduce its fiscal deficit and move faster toward its goal of balancing the state’s books.

During the past days, different news sites reported that one of the alternatives considered is suspending the progressive reductions to the taxes on soybean exports. And even though Agro-Industry Minister Luis Miguel Etchevehere, a prominent member of the agricultural sector before being tapped by the Executive, rejected the rumors saying “it is a ridiculous tax,” the articles assure the government is definitely considering it.

“It is not an isolated measure, it would be implemented along with others. The sector cannot dismiss all the gestures the government had with it, especially at a moment of austerity where all Argentines are making an effort. We are talking about delaying the reduction of the taxes, not even increasing them,” a source told Clarín.

Luis Etchevehere

Luis Etchevehere

As a result of this, the sector’s main representatives are already on their toes and began taking actions to quash any chances of the rumor becoming real. Today, organizations grouping agricultural producers will ask Macri for an “urgent” meeting. “We reject any possibility of suspending them [the reduction of taxes] or reinstating the ones on wheat and corn,” said Sociedad Rural Argentine head Daniel Pelegrina. “We will do what we have to,” he added.

This statement is not a minor one. The agricultural sector is a mayor player in the Argentine economic and political landscape, and has always sided with Macri due to two factors: their mutual aversion to the former President, Cristina Fernández de Kirchner, and Macri’s promises – and posterior actions – to reduce taxes on the sector.

The conflict between Fernández de Kirchner and the sector was a breaking point in her presidency. It was front-page news for weeks in 2008 when the two squared off and ground the country to a halt.

In March 2008, the government decided to raise export taxes on soybeans and sunflower to effectively 44 percent; the farmers retaliated with roadblocks and thousands of protestors wielding pots and pans that shut down the country.

A picture of the protests in 2008. Photo via La Nueva

A picture of the protests in 2008. Photo via La Nueva

The bill passed the lower house, but when it came to the Senate it was tied with 36 votes in favor and 36 against, leaving the final decision to the president of the Senate – Vice President Julio Cobos. Cobos holed up in his office until late into the night while protests thronged the streets, and emerged to say, “may history judge me, my vote is not positive.”

This division dealt a devastating blow to Kirchnerism, marking the first public failure since Cristina’s late husband, the former president Nestor Kirchner, took office in 2003. It also marked the birth of Cristina’s brand of Kirchnerism and an era of harsh capital and import/export controls.

Macri, on his end, vowed to reduce taxes on grain exports during his presidential campaign. And effectively, it was one of the first measures his administration implemented after taking office.The taxes on wheat and corn have been eliminated, while those on soy were initially reduced to 30 percent and, since January this year, are being reduced by 0.5 percent each month. Currently they are 27.5 percent.

Speaking at a conference, head of the Confederación Rural Argentina, Dardo Chiesa, said that “if we want to take a qualitative step forwards, we [the government] have to respect what was agreed.” “It is robbing the producers, betraying what was agreed and what was said. It is going backwards to old practices,” he added, in a not-so-veiled reference to the former President.

So far, no government official but Etchevehere has come out to address – much less confirm or deny – the rumors. But should they become a reality, the government would increase – or not reduce – its tax collection at the expense of creating tension with a sector that has already proven can be a powerful enemy.

Update: when consulted about the possibility of suspending the reduction of taxes, Treasury Minister – and now “economic coordinator” Nicolás Dujovne neither confirmed nor denied the rumor.