Farmers in Argentina Fight Back Against Crippling Export Taxes

Refusing to sell soy, corn, and wheat overseas leading to shortages and rising world prices
By Autumn Spredemann
Autumn Spredemann
Autumn Spredemann
Autumn is a South America-based reporter covering primarily Latin American issues for The Epoch Times.
August 16, 2022Updated: August 17, 2022

Global food exporter Argentina is struggling to find a middle ground between its producers and government policies—a rift that may lead to even higher world prices for corn, soy, and wheat.

Since the onset of the pandemic, Argentinian farmers have fought an uphill battle against a surge in government export taxes, severe inflation, and a devalued currency. At the same time, growers are also dealing with fuel shortages stemming from Russia’s conflict in Ukraine.

While inflation in Argentina is approaching 70 percent, experts say it could reach as high as 90 percent by the end of the year.

Runaway inflation has facilitated one of the primary issues that farmers are having with their government, which is payment. Because of high tax withholdings and poor exchange rates, producers receive less than 39 percent of the international price for their exported crops.

Transgenic soy plants are seen in a field near Santa Fe city, some 500 Km northwest of Buenos Aires, Argentina
Transgenic soy plants are seen in a field near Santa Fe city, some 300 miles northwest of Buenos Aires, Argentina. (Juan Mabromata/AFP/Getty Images)

“Out of every US$100 generated by a farm per hectare, approximately US$62 are paid in taxes,” analyst Juan Carlos Lascurain, the CEO of Grosvenor Square Consulting Group who specializes in economic policies in the Americas, told The Epoch Times.

He explained the agricultural tax structure established by the administration of President Alberto Fernández could raise US$300 million per year, of which roughly US$200 million will come from soy producers and the remaining US$100 million from wheat farmers.

That’s created a scenario where growers have lost the incentive to sell their crops on the international market, which also drives up the prices for their crops.

“This increase, as any other increase produced by a hike in the tax rate for producers, will increase the price of these basic commodities. Therefore the prices of goods that use these commodities will rise too,” Lascurain said.

He also noted that Argentina would likely lose the tax gamble in the long run since it will make the country’s exports less competitive in global markets. As a result, consumers will turn to neighboring countries such as Brazil for cheaper prices.

Export taxes hit 33 percent in May, which sparked a nationwide protest, roadblocks, and a total shutdown of the agricultural sector on July 13.

Farmers also have begun hoarding their crops to sell domestically, rather than exporting them to avoid the debilitating export costs. They’re using the commodities as a bargaining chip for more favorable economic policies.

Collectively, producers sold just 46 percent of the soy harvest in July. By comparison, 57 percent of soy crops were sold at the same harvest stage in 2021.

Shortfalls in soy, corn, and wheat exports from Argentina could result in another punch to the global commodities market.

Lascurain says agricultural sector disruptions could drive the price of wheat back up to where it was at the onset of the Russia–Ukraine conflict.

Epoch Times Photo
Former Argentine President Cristina Fernández de Kirchner during her last day in office in Buenos Aires on Dec. 9, 2015. (Juan Mabromata/AFP/Getty Images)

Argentina’s grain exports last year topped out at more than 60 million tons, putting it on par with major European grain producers such as France.

The president of the Argentine Rural Confederations, Jorge Chemes, called the farmers’ demonstration and shutdown in July a “cry of despair.”

“Not only because of the tax pressure, but also because of the pressure felt due to the lack of [pro-agricultural] policies,” he said.

He also noted an underlying “uncertainty and mistrust” with the administration of Fernández. That’s because this isn’t the first time a leftist government has tried to make Argentine farmers pay the price for its exorbitant spending habits.

Export taxes for agricultural products have been present throughout much of contemporary Argentine history.

“They deepened from 2003 onwards, with the arrival of Nestor Kirchner and Cristina Kirchner to power,” political analyst Orlando Gutierrez-Boronat told The Epoch Times.

Producers Versus Peronism

Farmers and Peronist regimes have historically been in conflict with each other. Growers feel victimized by what some have called the reckless spending of the state, and have accused left-leaning Peronist regimes—including the current administration, in which polarizing politician Cristina Kirchner is vice president—of being inefficient and corrupt.

A self-described “militant Peronist” and champion of socialist economic policies, Kirchner acted as president from 2007 to 2015 after her late husband and former President Nestor Kirchner left office.

Under the left-wing populist ideas of the husband-wife duo—known locally as Kirchnerism—inflation hit 127 percent between 2007 and 2012.

Farmers bore the brunt of attempts to raise taxes then as well. The former president and current vice president in 2008 attempted to raise export taxes to 44 percent from 35 percent.

Producers quickly countered with a total shutdown of the agricultural sector and blockade of national roads throughout the country, in a coordinated effort between the agrarian groups Rural Argentine Confederations, the Rural Argentina Society, and Coninagro.

But it appears that Fernández’s administration hasn’t gotten the message that farmers will only tolerate being pushed so far.

With inflation climbing and a volatile commodities market, the stakes are as high as ever.

Foreign Currency Cash Cow

The agricultural sector plays another important role for Argentina’s struggling politicians: It’s a major generator of foreign currency.

Depleted government reserves of U.S. dollars for making payments in the wake of diminished international credit, coupled with a flattened local currency, has forced the country to use dollars as a life raft.

Shipments of oilseeds and grains alone generated almost US$33 billion last year.

Fernández’s government asked crop exporters and processing companies to generate sales to the tune of $1 billion in August, counting on the cash infusion to help strengthen the nation’s reserves. However, Gutierrez-Boronat notes there’s little incentive for farmers to meet this demand with the diminished official exchange for the Argentine peso.

“Per ton exported, an Argentine producer receives $144, an Uruguayan producer receives $512, a producer in Brazil receives $510, and one in the United States receives $530,” he said.

Lascurain maintains pushing farmers and limiting their access to U.S. dollars will aggravate the existing economic crisis, as it will be more difficult for farmers to trade their goods with the deflated peso rate.

Current economy minister Sergio Massa said in an Aug. 3 speech he planned to rally exporters to bring in US$5 billion over the next 60 days.