The clash between soybeans producers and Argentina’s Government regarding the “variable tax rate” system set up by the Authorities in March continues and the Government’s cancellation, with only a few hours’ notice, of a meeting with producers on May 26 bears witness to the situation.
The system seeks to index taxes levied on soybeans exports on world prices. Consequently, the recent soaring prices have led the Argentine Government to raise these taxes to 44% per ton from 25%.
In addition to increasing tax revenues, this policy essentially aims to avert inflationary risks and maintain agricultural production levels to meet domestic demand. Thus, it allows the Argentine authorities to extend to soybeans a price control policy applied since 2005 to wheat, corn, milk and even meat production.
However, this arrangement is highly contested by Argentine farmers who risk a serious drop in income since a major share of their revenues is generated by export, notably in the case of soybeans. To express their disagreement, they began a vast striking movement that stopped soybeans and grains exportation and the formation of roadblocks throughout the country. Since then, negotiations are at a standstill, each party refusing to bend regarding respective demands.
This wrestling match could prove very costly to Argentina, the world’s third exporter of soy seeds export and first shipper of soy oil and flour. If, up to now, this conflict only had a very minor impact on export capacity, the situation could get worse as stockpiles used by exporters to execute their contracts are slowly withering.
This conflict also shows that, in a world that is becoming more and more liberalized, a “protectionist temptation” represents the only opportunity available today to a nation to ensure its food security. Now more than ever, it is therefore imperative that the international community sets up goals concerning food security at both the global and national levels, as it is done to liberalize trade in the framework of WTO negotiations.