In Argentina, numerous changes were proposed by the new government in the early days of the current administration. The impact of these changes is different depending on the affected sector. However one of the sectors that appear to benefit the most is the agricultural export segment.
Agricultural export legislation changes
One of the first steps of the administration was the elimination of export duties of all products of agricultural origin (grains, fish and meat) except soy, lowering from 35% to 30% retention, with a gradual rate reduction program in the coming years. In recent years these tax rates had noted increases and becoming one of the main contributors of state revenue; growing up from ARS 45,000M in 2010 to nearly ARS 120,000M in 2015 (more than 250% increase), according AFIP reports.
The most invited change brought about by this administration was the repeal of the Registry of Export Operations (ROE – Registro de Operaciones de Exportación), which was originally created as an instrument for statistical purposes. As early as 2008 this had been used by the previous government as a barrier to agricultural exports. This is best explained in activities where discretion in qualification decisions was in question.
This registry was replaced by the Affidavit of Foreign Sales (DJVE – Declaración Jurada de Ventas al Exterior) incorporating the initiative of ROE, as an instrument for statistical purposes.
Together with the regulatory changes in DJVE, the Argentina’s government influenced the official dollar exchange rate from ARS 9 to nearly ARS 16 per dollar. This is a huge incentive for agribusiness as previously this sector was hit with export barriers and commodity devaluation, where for example the international pricing of soybeans, representing the largest volume of grains of Argentina, was down 55% from SEP-2012 to JUN-2015. This caused immediate effects, such as the export of 3.7 million soybeans stocks in January, a size never seen before for just a month.
These changes have certainly helped to restore the country’s position as a positive change to Argentina’s economy, attracting investments in a more optimistic way for this sector and also resulting in secondary positive effects, such as the increase of crop rotation, which is due to the elimination of wheat and corn retentions. This change also expects to see an explosion of growth in wheat planting predicting an increase of 15%.
In short, Argentina needs the growth in exports to improve its trade balance. The agribusiness sector is a key element to produce this growth. The new government has not wasted time by changing the course of the outgoing administration, and drawing closer to global markets. The next step will be opening talks and the borders to free trade. Argentina has expressed intention to enter on the recent signed TPP, Trans Pacific Partnership.
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