South America Calling

Argentina's Election and Soy Exports

All Argentines are dialed in to their presidential campaign, which goes to a second-round vote Nov. 22.

And the country's grain farmers are watching closer than most.

They still have a quarter of their last soybean harvest in silo bags across the country and their strategy for selling depends on who wins and on the economic measures that must quickly follow when either Daniel Scioli, the ruling party candidate, or Mauricio Macri, the pro-market opposition candidate, takes over Dec. 10.

Argentina's tax of soy exports was one of the focuses of the debate this week.

The 35% tax on soybeans supports around a third of government spending and so is vital to balancing the books.

As such, neither Scioli, who would be the successor of leftist, interventionist Cristina Fernandez but who has pledged gradual market-friendly reform, or Macri, who is liberally inclined and the farm sector candidate, will be getting rid of the tax.

But in a nod to the sector, Scioli's camp said this week it would cut the tax to 25%, improving on a vague promise to reduce farm export tariffs.

That's a response to Macri's offer of a five-percentage-point cut in December, followed by five-point reduction in each subsequent year.

According to Politica Online, a local news website, Macri's camp reacted by saying they would match the 10-point cut offer for December.

But farmers are not holding on to 15 million tons of soybeans, according to Argentine Rural Society estimates, in the expectation of a 5- to 10-point tariff cut. They are primarily waiting for a peso devaluation and the easing of the controls on capital flows.

Argentine farmers currently must convert soybean export dollars to pesos at the official rate, which today closed at $1 = AR$9.59. However, the black market rate hit $1 = AR$15.00 today.

Macri has pledged to dismantle the controls on foreign exchange dealings from day one and has said he would let the peso float.

That is obviously music to soybean farmers' ears, who see the possibility of a 50%-plus jump in prices. The question is can Macri lift controls without causing an exchange crisis?

Scioli has also committed to unwind controls, but in a more gradual manner. Such a plan would offer more control, but the concern is that raging inflation will eat up any of the gains from incremental steps.

Macri surprised with a strong showing in the first round of the election and latest polls give him a handy lead on Scioli. The election is far from a foregone conclusion though.

Alastair Stewart can be reached at



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