The foreign exchange income forecast for the period January-April 2024 could reach 8 billion dollarsa figure higher than the $5,128 million grossed in the same period this year but lower than $11.1 billion compared to the same period in 2022the year before the drought.
This projection analysis of foreign exchange earnings between January and June 2024 takes into account the latest and recent announcements by the national government on economic, foreign exchange and export rights matters.
The dynamics of the situation and the speed of changes in events mean that this projection should be considered as the Photography of the current situation.
Two weeks after the installation of the new government, the dynamics of events, announcements and changes are moving at a speed never seen before in the history of the country. Of all the concerns expressed by the economic authorities, one stands out: the need for foreign currencywhich represents the priority to facilitate the fastest possible transition towards inflation rates away from hyper.
Let’s see what measures have been implemented by the government to begin to alleviate exchange rate imbalances and eliminate the distortion of relative prices, a consequence of the political and economic negligence and subsequent mismanagement applied by the previous government.
Added to the 110% increase in the price of the official dollar, from 380 pesos to 800 pesos per unit, is the possibility for exporters to liquidate a new agricultural mix in dollars, which is made up of 80% of the official value of the dollar known as the Single Free Trade Market and 20% of the settled dollar. As of mid-week, the result is $/US$850.
Another of the measures announced was the increase in export duties (known as withholdings) on all agricultural products at 15%.
In principle, soybeans, oil and soybean by-products were excluded. which remain at 33% and 31% respectively.
In the latter case, a proposal from the Secretary of Agriculture this week increase withholding taxes on exports of soybean meal and oil from 31% to 33%since the beginning of tax equalityshowing to ignorance of the origin of this differential which helps maintain the competitiveness of the soybean industry and the generation of added value.
The modification of withholding taxes must be presented, discussed and approved by law in the National Congress. For this reason they are not yet valid And it is very useful to do an exercise and shed light in order to estimate the potential impact of this measure on future foreign currency earnings.
Are wheat and corn producers opposed to an increase in withholding taxes from 12 to 15%?
At first glance, if producers received a 110% increase in the value of the dollar due to devaluation, it makes sense to think that a 3 percentage point increase in the level of withholding taxes it should not cause wastesince the improvement in the exchange rate is substantially much greater than the 3% loss of the price received due to the increase in withholding taxes.
This, without forgetting export withholdings It’s the worst toolthe most discriminatory and with negative effects on the competitiveness of the production and agri-export sector.
Now, compensate for the lack of increases in withholding taxes on regional economies’ products by increasing withholding taxes on soybean oil and flour, thus sacrificing the competitiveness of the most competitive sector in Argentina such as the industrialization of soybeans, oils and by-products, could have an impact boomerang effectgenerating a lower foreign exchange earnings in 2024 and endangering sources of work.
Loss of competitiveness
Let’s see what the impact of the provision which involves the elimination of the tariff differential currently in force could be.
With the elimination of the current 2% differential in export withholding taxes (from 31% to 33%), the oil industry must shoulder an increase in production costs. between 9 and 11 dollars per ton.
To do this, the oil industry must lower the purchase price of available soybeans by paying producers between 9 and 11 dollars less per ton.
Therefore, the main victims of the increase in withholding taxes on soybean meal and soybean oil are the producers, who They will see their revenue reduced by about $400 million per year.
At the same time, with the reduction to “zero” of withholding taxes on products of regional economies, 95 million dollars a year stop receiving dollars from export withholding taxes.
Disproportionately, as withholding taxes on soybean meal and soybean oil increase, the government prefers (or does not realize) soybean producers to lose $400 million, when the cost of withholding taxes is “zero.” for regional economies it is $95. Millions of dollars.
Do soybean farmers or rural unions know this?
The loss of the withholding differential affects the competitiveness of one of Argentina’s most competitive sectors, the soybean processing agroindustry, and once again places our country as a benefactor of the export of agricultural products Instead of promoting exports with greater added value.
The lower income that producers will receive could have a negative impact on the use of better technologies in the next 2024-2025 soybean planting season and a negative impact on the potential of sowing area and production volume.
Foreign currency income will decline in 2024
The loss of the differential would cause a further increase in soybean exports to an estimated volume of 3 million tons. If that happens, the only way to compete with soybean supply from Brazil (which exports 100 million tons of soybeans) is lowering FOB export prices of Argentine soybeans.
In this way, foreign currency income would increase by 1,401 million dollars. But the reduction in soybean milling volume, due to negative milling margins, could be more than 5 million tons, and foreign exchange earnings in this line would decrease. 2.26 billion dollarswith a net balance of a currency decline of 860 million dollars.
Source: Clarin
