Macri Moves on Export Taxes for the Agriculture Sector

Argentina's new president Mauricio Macri moved quickly to end the Kirchner era on Monday by eliminating the export tax on some agricultural and industrial products.

Macri announced the move while meeting with farmers in Pergamino northeast of Bueno Aires.

"Indeed with these measures Macri is fulfilling a key campaign promise," said Bruno Binetti, Research Associate, Inter-American Dialogue.

The lifting of export taxes for most grains including corn, wheat, meat and fish except soybeans will not represent a big burden to the government but sends a strong signal, Binetti noted. That the new government wants to work with the agricultural sector not against it, he added.

The government though needs to take a multi-step approach to address the problems in the agricultural industry. Including competitiveness and the hoarding of some products by farmers. Binetti said that the sector expects a devaluation of the peso and they will wait until that happens to sell their remaining stock.

"This government needs this to happen as soon as possible to get the hard currency it desperately needs," says Binetti. According to some estimates, the agricultural sector could have up to USD$8 billion in unsold crop said Binetti.

The elimination of the export tax is just step one in a series of economic shifts Macri will need to implement growth in Argentina's flagging economy. Binetti says that the government will have to launch programs of industrialization of agriculture. In a context of lower commodity prices, he continues, exporting grain is not enough to generate economic growth. For this Macri has promised tax incentives, an important infrastructure program among other incentives from the government.

Much work lies ahead for Macri and his administration. After 12 years of the Kirchners and their populist and socialist agenda, he will have to step ahead to change many areas of Argentine economy and policies.

"The central question will be whether the government is capable of translating agricultural exports into economic development and growth," stated Binetti. A progressive tax system and public policies will be key, as well as the capacity to attract investment, both foreign and domestic to industrialize Argentina's enormous agricultural capacities, he noted.