The fact that the elections were won by Javier Milei not only frees us from the unbearable Kirchnerist decadence, but Argentine society for the first time gives liberalism the opportunity and a historic change in expectations emerges. This news could not be better for the countryside that always cried out for the freedom of markets and to get rid of the elephant of the State.
The first actions and projects of the Milei administration show us, on the one hand, bold objectives and, in broad strokes, focused on the correct course towards a free, more open economy, without privileges or traps tailored to friends. But also in the first days, fiscal measures were announced, also daring, but which severely punish the economic equation of agriculture.
On the one hand, the bill to increase DEX (Export Duties), better known as “withholdings”, came as a surprise to the sector. It was not something announced (logically) in the campaign, nor is it consistent with liberal discourse. On the other hand, the tax pressure for importing agricultural inputs increases sharply via the “Country Tax”, which rises to 17.5%. A “Double Nelson” that punishes the equation of sales and purchases.
This combination of falling income via DEX and increasing input prices affects not only profitability, but also the ability to apply technology. It hits directly into the input-output relationship. A Brazilian buys inputs and technology at international prices without a 17.5% discount and sells his soybeans without a 33% discount. Which, our competing neighbor, is in a “normal” position, but we are not.
For an Argentine, agriculture is like starting a 100-meter race from 17.5 meters behind the starting line, and extending the finish line by about 33 meters, vs. the rest of the producing countries that run 100 meters flat. Competition that is impossible for us.
The devaluation (which was sung), generated in many cases, but not in all, a relief on the eventual debt of agricultural companies that accessed financing in pesos. For those cases, it is a very important incentive, but logically it is only once.
The dairy was in a terminal situation, the devaluation severely affected the value of the product, but by releasing shelf prices, and dairy products being exempt from DEX, the most likely thing is a recomposition of values and recovering profitability. And the bottom line: being able to work without DEX and without price controls. Welcome to the free market for dairy products!
Meat also greatly welcomes the liberation of prices, as well as the fact of burying without shame the absurd export quotas that Kirchnerism had been applying.
In grains, the “Balance Volumes” were eliminated, which was the euphemism for opening and closing exports with the complicity of the private sector, which knows how to handle itself in intervened markets. Of course, the entire party was at the expense of someone who is alien to these issues and maneuvers and has no room for maneuver. Good news!
Another bold measure, and on the right track, is to eliminate in the bill the perk (which only M Macri had dared) of the sacrosanct “oil differential” of 2% of the FOB value of oil and soy flour. An amount that means a whopping US$400-450 million a year in the transfer of resources from the farmer to the industry. The fact that there is a special tax window for those who export these two products generates an asymmetry that is very easy to be appropriated by the industry. You can already hear the screams of fury from the oil producers, who loudly claim their “historical advantage.”
The changes sought in the union order, de-bureaucratizing trade and economic activities, the breaking of historical “quintitas” such as registries, trusts and other issues that torment the farmer, reveal a horizon of hope for the coming years once all this can materialize.
But, on the other hand, there is the famous “chainsaw”. The farmers want to see the reduction in public spending in action. Many accept the effort of greater tax pressure, if the reduction in spending is made effective. If this is not seen soon and vigorously, it will become more difficult to swallow the toads of tax increases.
From the counter-factual point of view, one more Kirchnerist government would not have been supported by the countryside. Today we have this hope, which is just beginning to take shape.
We farmers know that to harvest you must first sow. Let’s hope to see the harvest of liberalism soon, not only for the countryside, but for millions of Argentines today plunged into poverty and stagnation.
Santiago del Solar is an agricultural producer.
by Santiago del Solar
