Editor’s note: AgriBusiness Global LIVE! presented Latin America: Opportunities and Challenges on April 17 with five panelists, including Diego Taube. Here Diego shares his insights into Argentina’s crop protection market and what you need to know to do business there.
Argentina will always be an agricultural nation.
We have the blessing of having a huge agricultural area, fertile soils, and thanks to the work, the technology and intelligence of all the agricultural areas, super-efficient farmers.
On December 10, 2023, we received with happiness and hope the new President Javier Milei, who Time magazine listed as one of the 100 most influential people in 2024, would make some big changes.
During the agricultural campaign 2022-2023, we had one of the worst droughts in Argentinean history. The output per hectare was low, and in many cases, the farmers could not recover the investment for the technological package (seeds, labor, plant protection and nutrition). The situation was even worse for those that had rented the land.
Hope for Relief
While normal countries encourage exports, in Argentina they are taxed. The farmers have to pay 33% on the value of the exports of soy (bean, oil, and flour), while the exports of wheat, corn, and meat pay 15%.
Milei had promised during the campaign that he was going to reduce the export tax to 0%. So far, this has not happened. On the contrary, they have generalized a tax of 17.5% for all the imports.
During the previous administration, the gap between the official USD rate (which is the rate that the exporters receive when they are paid from abroad) to the unofficial rate or the exchange rates linked to bond arbitrations was approximately 100%. The worst thing is that they froze the payments to the suppliers from abroad, putting all the importers in a default situation, although they had the money to pay their debts.
Milei came up with a plan. The imports were divided by a date: December 13, 2023. Everything that was customs cleared before this date had to be paid using three different bonds created for this effect: Bopreal Serie 1; Bopreal Serie 2; and Bopreal Serie 3. Each serie has different characteristics, such as due date, amortization, and interest rate.
Originally, the imports that were customs cleared after December 13, 2023, could be paid in four monthly installments of 25% starting at 30 days from customs clearance and ending at 120 days. Still pharmaceuticals and many crop protection products had an exception and could be paid at 30 days from customs clearance. Since things are dynamic and considering the strengthening of the reserves of the Central Bank, now all the companies that are considered micro, small, and medium enterprises can transfer at 30 days from customs clearance, independently of the product.
Cancelling Export Tax for Next Season
The wheat season will start in some weeks, and the farmers started conversations with the government so that the promise of cancelling the export duly will take place. The international price of this crop is not the best. In order to stimulate it, Luis Caputo, the Minister of Finance for Argentina, announced on X (formerly Twitter) made two tweets:
On April 8, he announced the idea to decrease of the import duties from 35% to 12.6% for 2,4D form, glyphosate form and atrazine form. The import tax of atrazine TC is indicated from 24% to 10.8%.
Durante el mes de abril vamos a estar tomado las siguientes medidas para favorecer al agro:
– baja de aranceles de herbicidas
– mejora de aprobaciones de los permisos de Senasa.Los herbicidas a base de Atrazina, Glifosato y 2-4-D bajarán del 35% al 12.6% (que es el Arancel…
— totocaputo (@LuisCaputoAR) April 8, 2024
On April 10, he mentioned that the of import duty was going to be eliminated for urea (it is 5.4%) and of mixtures of ammonium nitrate (it is of 3.6%).
Atentos a las necesidades del campo, y en aras de mejorar su competitividad, vamos a avanzar en la eliminación de los aranceles aplicados a la urea y sus mezclas con nitrato de amonio, que actualmente se ubican en 5,4 y 3,6%.
Esta medida implicará un impacto directo a los…
— totocaputo (@LuisCaputoAR) April 10, 2024
The problem that the agricultural sector is facing is that the commerce is paralyzed waiting for these measures to take place. Nobody understands the reason for taking these measures since they:
- Will affect the national formulation industry, which has excellent quality and enough capacity, and exporting work to factories from abroad.
- Will not decrease the price of the agrochemicals at farmer level. Who will win: the exporters that will raise the price since they are aware of the tax decrease and some of the importers.
- (The State) will collect less taxes since the import duties will be lower.
The tweet regarding the decrease in the herbicides has brought all kinds of speculations, since the market believes it is meant for one particular company that has a patented formulation.
On the Upswing
In the end, things are improving. This is why:
- The payments to suppliers are stabilizing.
- The import licenses, which were a nightmare, are now just a mere declaration.
- The Central Bank of Argentina is getting more and more reserves.
- Most of the importers are making the effort and looking for alternative ways so that the money reaches their creditors.
I would like to stress that Argentina is growing in other sectors like oil and gas (specifically shale gas with the development of Vaca Muerta), and also with lithium where we have huge reserves. The country will never give its back to the agricultural sector, which is the only one that in one calendar year makes a huge difference in the trade balance of Argentina.