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The damage caused by drought spares no one: the reserves of the plant suffer as well as the tire specialists and motorway grids

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Today’s calculations, which could get worse tomorrow, say the drought will deny Argentina’s economy about $20 billion this year. The blow can be measured in how much it cuts to GDP -between two and three percentage points- in reserves that the Central Bank will not be able to accumulate, or in dollars that importers will not be able to buy, for example.

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So far what could be seen under the “macro” magnifying glass. The lack of dollars will also make you the task for the Central Bank of controlling the rise in the official exchange rate is more difficult, and also bond trading operations to “trample” the prices of financial dollars.

Of course, the prospects for the many services that accompany the harvest are complicated. So, for example, it is calculated that if 40 million tons of cereals are lost, as planned, there will be 1.2 million fewer truck journeys. Here the lorry driver, the lorry owner, the highway grids, the hotels, the gas stations, the mechanical shops lose.

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Even construction companies that will have less pretensions to improve company structures but also those who wanted to improve their homes, perhaps by adding a swimming pool.

Even restaurants, tire shops, suppliers selling all kinds of inputs, agricultural machinery manufacturers lose.

The exchequer loses and the collection of deductions will fall like a piano, but still keep 30% of the crop. And what’s more, it will pay dollars at the official exchange rate, even though it’s true that everyone expects the soybean dollar to appear any minute. Today, for example, a ton costs $558 in Chicago and 90,000 pesos in Rosario, equal to $236. The difference between Chicago and Rosario: the gap and the retentions.

One could say that the local producers are in East Germany and the Brazilians, Paraguayans and Uruguayans on the other side of the Berlin Wall (the Uruguay River, to simplify) have full freedom to get full price.

Against this reality, the various aid plans that the government is putting in place are just a painkiller.

In the election year, the opposition candidates have already let the agricultural management know that they do not even dream of receiving the benefit of a reduction in deductions at the start of the next government, if the political sign changes. The tax needs are so great that there is no room for immediate tax relief.

Although no one is saying it, what could be expected is a significant increase in the official dollar exchange rate.

Perhaps the optimistic note is that it began to be said that the La Niña phenomenon was about to end. You have to hold on to something. But the damage is already done.

Source: Clarin

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