Argentine government reinstates “soy dollar” to capture foreign exchange and sparks criticism from ruralists

Argentina reestablished on Monday (Nov. 28) the so-called “soy dollar” to allow agro-industrial entrepreneurs to settle their exports at an exchange rate of 230 pesos per dollar, according to the norm published in the Official Gazette, with which the government hopes to raise a minimum of US$3 billion.

The “soy dollar”, valid until Dec. 30, is more attractive to exporters than the official wholesale rate, currently at 165.59 pesos per dollar, but implies an advance of foreign exchange from the agricultural sector and an increase in the non-monetary liabilities of the Central Bank.

This exchange incentive scheme is part of the Export Increase Program that allowed in its first edition, last September, to settle more than US$8 billion and export almost 14 million tons of soy in less than a month, as Economy Minister Sergio Massa recalled last Friday at the time of the announcement.

The measure also allowed Argentina to meet quarterly targets the International Monetary Fund (IMF) set.

Argentina needs to collect export duties from soybeans and raise foreign exchange to meet the targets set by the IMF.

Massa claimed last Friday that Argentina “will close the year meeting the 2.5% target” of primary deficit and “will close the year meeting the target of accumulation of reserves,” which are the international commitments.

The regulation published on Monday authorizes the Ministry of Economy to issue dollar bills with a ten-year term to cover the equity gap that this decree generates for the Central Bank.

The “soy dollar” generates a monetary issue to buy the foreign currency that, according to a report by the SBS management company, could be between 18% and 20% of the monetary base in November, which will mean extra sterilization efforts by the Central Bank, in an inflationary context of 88% per year and a high level of debt for the monetary institution.

Massa reached this agreement with the agro-industrial chambers, before which he acknowledged that they are “one of the protagonists in the process of accumulating reserves” and which promised to liquidate a minimum of US$3 billion.

However, rural groups were dissatisfied with the measure: “The ‘soy dollar’ shows a need for money. It’s not a measure for the countryside; it’s a form of revenue collection,” Nicolás Pino, president of the Argentine Rural Society, told the radio station Continental.

According to the rule published on Monday, part of what the state receives in export tariffs will be destined to finance programs that serve regional economies and local value chains.

With information from efe