Food for thought: Argentina agriculture minister hopes to reap benefit of tax rethink

Q: Argentina's government has removed most export taxes on agriculture products put in place during the previous administration. What has been the impact of this measure so far?

A: The impact has been meaningful because we lifted all export taxes on agriculture products, except for those on soybeans, which were lowered from 35% to 30%. Argentina came out of one of the worst sowing season of all times in 2014 because of the policies of the previous government. Just by lifting export taxes, we are seeing increases in the sowing and harvest of major productions such as wheat and corn, which we expect to grow by 50% year on year to 15 million tonnes and 40% year on year to 35 million tonnes, respectively.

Q: Why didn't the government put a zero export tax on soybeans?

A: Because we have fiscal needs. We are going to have a gradual reduction according to the fiscal possibilities. Our aim is to reduce by 20% export taxes on soy. But there [is a lot of expenditure] backed by the fiscal revenues originated by soy exports, and we have to redistribute funds to sustain these costs.

Q: From a more general fiscal perspective, how did you cover the measure of lifting or reducing export taxes on agriculture products? 

A: With debt to some extent – the remainder is going to be covered next year. Fewer export taxes are going to produce more benefits, more VAT taxes, and eventually more fiscal revenues.

Q: What is the government's overall vision for the development of the agriculture sector, which contributes about half of the country’s exports?

A: Argentina disappeared from the global markets. We had exports of $85bn [in 2011] which then fell to $55bn in 2015, partly because of smaller volumes, partly because of lower prices. We need to get back to trading with the world. We have to regain markets for Argentinean meat, wine and rice. Today our production covers the needs of 400 million people; we are aiming to increase this to 600 million people. We are 0.5% of the world's population, in five years' time we want to feed 8% of the world's population.

Q: Argentine products lack competitiveness, and even locally Argentinians pay more for domestic agriculture products than any of their peers in South America. Why is that?

A: It is clear that some sectors are very concentrated, and they can determine the prices. This is part of reality. Then Argentina is one of the countries in the region with the highest fiscal pressure, which is something we inherited from the previous government, and we are committed to lowering it.

Q: Is the government’s infrastructure plan going to make agriculture products more competitive?

A: In Argentina 83% of freight transport happens on trucks, with a cost of $0.09 per tonne per kilometre. This is 30% higher than other agriculture producers [in the region]. This has a big impact on regional economies, because they are miles away from the ports. For this reason we are going to prioritise the development of railways, because we want crops to reach the ports via railway, and thus lower the costs and increase the profits for the producers.

Q: Argentina has got plenty of land available for agriculture purposes. Will you also be willing to do land leases for countries looking to secure their future food security needs, such as China or the Middle Eastern countries?

A: So far we haven’t done so, and there is a legislation that prevents us from renting and selling agriculture land to foreigners. We hope to remove that obstacle, hopefully next year.