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Analysis: Argentina does everything it takes to capture agro dollars

By Marcos Tosi

The only country in the world to heavily tax its agricultural sector, Argentina has grown accustomed to confiscating from farmers one-third of the sale price of soybeans, its main source of international currency.

This year, however, in addition to being subject to the 33% retention, soybean producers have faced an official exchange rate that pays half the market rate of the U.S. currency.

The situation has led many to hold on to the stocks of the last harvest as long as they can in the hope of a better exchange rate.

Since nobody is obliged to sell, the government has appealed to a new strategy to capture the soy dollars.

Needing to gather until the end of the year international reserves above US$5.6 billion – a commitment assumed with the IMF – the economic team invented the so-called soy dollar.

In practice, instead of increasing the tax on retentions – risking starting a new war with the productive sector – the Casa Rosada changed its focus.

heavily tax, Analysis: Argentina does everything it takes to capture agro dollars
Cloudy sky at the Argentine soy field plantation panoramic. (Photo internet reproduction)

“We are at a level where the squeeze on producers is so great that a marginal gain in increasing the retentions would not improve the scenario much for the government.”

“So the Minister of Economy, Sergio Massa, who is not a fool, who is a politician, understood that it would be better to stimulate the producer to sell soybeans, trying something on the positive side”, evaluates Diego de la Puente, director of Nóvitas, one of the main agribusiness consulting firms in Argentina.


A frustrated attempt to implement the soy dollar had been made in July by the former Minister of Economy, Silvana Batakis.

In the second attempt, Minister Massa increased the “attractiveness” of the exclusive quotation for producers – 200 pesos per dollar instead of the official exchange rate of 160 pesos per dollar.

On the open market or dollar blue, the rate is 320 pesos per dollar. In just five days, 14 million tons were sold, representing an inflow of US$8 billion in foreign currency.

As the government is still in need of dollars, and as there are still about 10 million tons of soy in the hands of producers, last week, there was a second round of the soy dollar.

This time, a special rate of 230 pesos per dollar.

Sales, however, were less expressive, reaching on the first day only 300,000 tons, against 1 million tons of the first of the Dollar Soy I.

According to Diego de la Puente, producers did the math and saw that the industry and exporters, in fact, increased the amount paid in local currency, but still far from what was expected, which would be above 90 thousand pesos per ton.

“It is a question of supply and demand. If the producer sells a lot of soybeans, the exporter will pay less in dollars. And if the producer doesn’t sell anything, then they’re going to have to start raising the values a little bit,” explains De la Puente.

The dollar-soybean tool remains in effect until Dec. 31.

The enormous tax burden imposed on Argentina’s agricultural sector would bankrupt any of its major competitors.

“They take a third of the producer’s money for the dollar retentions, then pay for the soybean at 165 pesos, a ridiculous price compared to what is paid in the United States, Brazil, and Uruguay. Our problem is that we are rich in natural resources, so the politicians take advantage of it.”

“They take, take and take, and we keep on producing,” points out Sebástian Oliveros, chief commodities analyst at StoneX in Buenos Aires.

This heavy state hand has its price.

“We keep producing, but soy production is stagnant, while in Brazil, it has tripled in the last ten years. We don’t grow because you don’t give us the conditions,” Oliveros adds.


The former Minister of Agriculture Roberto Rodrigues usually jokes that Pero Vaz de Caminha lied in his letter to the king of Portugal when he said that in Brazil, if you plant everything, you can.

If you do not fertilize or correct the soil, the Brazilian land does not produce all this wonder. In Argentina, it is the opposite.

It has the most fertile land on the continent, near a hub of waterways in Rosario, which is also home to one of the largest soybean crushing facilities in the world.

The distances covered by trucks and trains that transport the grains to the agribusinesses or ports are at most 400 km, with an average of 200 km, against up to 2,000 km in Brazil – the distance from Sorriso (Mato Grosso) to the port of Santos.

In its more fertile soils, Argentina’s average productivity reaches 4.4 tons of soy per hectare, with peaks of 6.6 tons, while in Brazil and the USA, the average productivity is 3.5 tons per hectare.

This year’s August survey by the Center for Advanced Studies in Applied Economics (Cepea/Esalq/USP) shows that the increase in production costs has weighed more heavily on balance in Brazil than in Argentina and the United States.

Cascavel (Paraná) and Sorriso (Mato Grosso) had an average soybean operating cost in the last five harvests of US$ 551 per hectare.

In Argentina, the cost was almost half (49% lower), closing at US$270 per hectare, against US$508 in the United States (8% lower than in Brazil).

“Blessed by nature,” in one-third of their soybean areas, the Argentines simply do not need to use any fertilizer, while in Brazil, this condition is restricted to only 2.4% of the areas.


“Argentina is the country that has the lowest production cost per hectare. It is in this environment that, for many years, they have had a tariff policy on exports.”

They manage to be competitive despite this. With all the tariffs, they are even more profitable than the United States and Brazil producers. The costs inside the gate are much lower than ours.

heavily tax, Analysis: Argentina does everything it takes to capture agro dollars
Port of Rosario. (Photo internet reproduction)

With tariffs increasing from 15% to 18%, 20%, and now 33%, the context is getting more complicated.

Even so, they manage to export and have a margin.

The big point is that government intervention reduces new investments and generates uncertainty because the government can stop commercialization at any moment, and the agents invest less.

“Every time the rules of the game are changing with the game in progress, certainly, the investors will retract”, points out Lucílio Alves, a researcher at the Center for Advanced Studies in Applied Economics (Cepea/Esalq/USP).

The “export duties” collection was inaugurated in Argentina more than 150 years ago.

Between comings and goings, it came back strongly after the economic crisis of the early 2000s and became one of the biggest tax collection instruments during the Nestor and Cristina Kirchner administrations.

In the official discourse, the collection of retentionS, nicknamed “export duties,” is motivated by the development strategy of stimulating the industrialization of primary products, in this case, to transform soybeans into oil and meal.

In fact, Argentina currently dominates world exports of soy meal and oil.

This year it should export 28.2 million tons of soy meal (against 18.9 million from Brazil, in second place) and 5.7 million tons of soy oil (against 2.1 million from Brazil, also in second place).


For Federico de Cristo, professor of Macroeconomics at Universidad Austral, until 2010, “everything went from strength to strength” with the rise in soybean prices and the development of the industrial complex of grain milling, which brought more foreign exchange to the country.

The reduced availability of fertile land, however, and the difficulty of expanding production by increasing technologies (2% to 3% per year) would have made exports stagnate – according to De Cristo.

He does not attribute this stagnation to the policy of retentions.

“I believe the overall strategy is to generate incentives and add value in the country, not break exports. The tool used for this is to maintain the domestic price at some percentage below the international price. So far, it is possible to say that we have been successful.”

“There is a tiered retentions structure. The higher the added value exported, the lower the rate imposed, which also applies to leather and other commodities,” adds De Cristo.

Ultimately, the dollar that does not go into selling grain would be internalized by soybean meal and soybean oil exports.

“It’s a mixture of the intention of collecting more taxes with an incentive, in a taxing way, to generate more added value to commodities to export processed products,” he points out.

The thesis is refuted by the chief economist of the Agricultural Foundation for the Development of Argentina (FADA), David Miazzo.

He notes that today soybeans pay 33% retention against 31% for oil and soy flour.

He says flour and oil could be zero-rated and soybeans 5% if it were an incentive to industrialize.

And it would not need to start from a level above 30%. For more than ten years, the minimum difference in taxation has only occurred so as not to discourage soybean crushing.

“For example, imagine that a ton of grain is worth 100 dollars and that the industry adds 10 dollars by transforming it into flour and oil.”

“If I apply the same export duty to the grain and the by-products, the grain will pay US$33, and the by-products will pay 33% as well, but on US$110. They end up paying US36. So, this differential exists today only not to harm the industry and the producer,” says Miazzo.


The defenders of the retentions say they work as an incentive to produce other essential foods, which are either not taxed or receive lower rates, such as wheat and corn, which pay 12%.

It would be a way to avoid soy monoculture.

Again, Miazzo rebuts: “From the point of view of economic efficiency, this is totally inefficient because the government, through a tax, is encouraging a crop that is less profitable than soybeans. If you think as a country, it is preferable to produce more soy and import some other crop.”

If soy, which is the most competitive crop in Argentina, is not profitable in a certain region, it will be very difficult for other crops to compensate for the cost of transportation, lack of rain, or less suitable soils.

Daniele Siqueira, grain analyst at AgRural, based in Curitiba, is also not convinced by the supposed objective of adding value by crushing soybeans.

“It’s baloney. It is such a primary industry that you just crush the soybean in a press, and part of it becomes bran, and another part becomes oil. There is no great aggregation of value, nor does it generate much employment and income,” he highlights.

For example, Agrural calculated the margin that crushing adds to Brazilian soy compared to selling it as beans. From US$559 per ton, as grain, to US$580 per ton as oil and meal.

Just US$25 more.

In periods of lower demand or more competition from other origins and other substitute meals and oils, the margin can become negative, making it more advantageous to export soybeans as beans than to crush them to make oil and meal.

In practice, the retentions have become a kind of anchor for the Argentine Treasury, financing the growing expenses with the civil service, social assistance programs, and gas and electricity subsidies.

The inflation and high external debt scenario made Argentina renegotiate loans with the International Monetary Fund (IMF), which requires, among other measures, that the country has international dollar reserve targets.

Argentina has the most fertile land in all of Latin America. (Photo internet reproduction)
Argentina has the most fertile land in all of Latin America. (Photo internet reproduction)

“The government is committed to fulfilling the agreement with the IMF because it knows that if it doesn’t, it is risking causing the chaos of currency devaluation and inflation,” says economist Federico de Cristo, from Universidad Austral.


The wheat crop fall due to drought has made life difficult for Alberto Fernández’s government.

According to Daniele Siqueira, the money from the wheat retentions – 12% on the sale price – will no longer have the expected volume.

Hence the reason for the launch of the Dollar-Soybean II.

“The producers know that it is just a government patch for a situation that may become unsustainable at a certain moment.

Every hour it is a patch to patch another patch. There is no stimulus to increase the planted area, only uncertainty.

Miazzo, from the FADA Foundation, follows the same line: “The government implements the dollar-soy because it doesn’t have reserves. Borrowing doesn’t work because nobody lends to Argentina. This only gives a breathing space for 30 or 45 days, nothing more.”

In the scope of international relations, the dollar soybean could be a shot in the foot.

Daniele believes that Brazil or the United States could even file a complaint with the World Trade Organization.

They use a special exchange rate for a specific product. It is an export subsidy.

This takes away the market of the United States, which are great exporter at this moment, and also takes away Brazil’s market, which could export a little more.

If they continue with this policy, they will harm the other players in the market.


Despite so much turbulence, the international scenario “conspires” in favor of the Southern cone.

Diego de la Puente, from Nóvitas, points out that after the war in Ukraine and the instabilities between China and Taiwan, there was a change in world geopolitics, rehabilitating a region that “had been neglected in the world.

“Europe has learned that it can never trust a country like Russia again,” says De la Puente. The only region fit to replace this provider would be South America.

“The world is changing; food and energy are becoming priorities. If we manage to strengthen Mercosur, we will have the opportunity to project ourselves as a much more important region in food production,” he says.

To take advantage of this reordering of the world order, however, it will be necessary to change the vision of those who govern below the equator.

“We are seeing more people who used to be in the private sector getting involved in politics, and that is where the change can come.”

“Not just anyone should be president, deputy, or senator, but we should have more balance, with more people from the private sector. People who pay taxes.”

“who suffer from a political vision in which the only interest is to capture more money from companies. It has started now, but until it changes, it may take years,” he concludes.

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