Explainer: Argentina’s farmers have some questions for President-elect Fernandez

Published 28/10/2019 in World News

Explainer: Argentina’s farmers have some questions for President-elect Fernandez

BUENOS AIRES, Argentina (Reuters) – Argentina’s farmers have some questions for President-elect Alberto Fernandez, after the center-left Peronist won a decisive election on Sunday, ousting business-friendly leader Mauricio Macri.

Across the country’s fertile Pampas grains belt, with vast fields of soybeans, corn, wheat and cattle ranches, the agriculture sector will now grapple with what a new president means and what policy changes could be in the cards.

The farming sector is Argentina’s biggest driver of exports and much-needed overseas currency, and will be key as Fernandez looks to right an economy mired in recession for much of the past year and stave off default on rising debts.

Fernandez is seen as a pragmatist and moderate but will enter the presidential palace alongside running mate Cristina Fernandez de Kirchner, the former president, who battled with the farm sector during her two-term administration from 2007 to 2015.

Fernandez has signaled he will not be as confrontational, but his policies are still unclear. As Latin America’s No. 3 economy readies for the new government to come into power in December, what are the big looming questions for farmers?


Farmers remember well the high taxes on overseas sales and export caps under Fernandez de Kirchner, who was in power before Macri moved to ease the burden on exporters.

Alberto Fernandez, who is not related to the former president, is seen as likely to hike levies too to help raise tax incomes needed to trim the country’s deficit and meet obligations under a funding agreement with the International Monetary Fund.

International shipments of soybeans, along with oil and meal derivatives, are taxed at 18% plus 4 pesos per export dollar, which comes out to about 25%. Corn and wheat are hit at 4 pesos per export dollar, which amounts to about 7%.

Any tax increase would be paid to the government by export companies. But it would be farmers who in effect pay the tax because the companies discount export taxes from the prices they pay to growers. So higher taxes would lower local crop prices, hitting farmers’ incentives to plant and produce grains.


With currency controls currently in effect, Argentina could also adopt a twin exchange rate to ensure the farm and export sectors enjoy the competitive advantage of a weaker currency, while setting the exchange rate at a stronger level for other sectors to keep inflation in check.

With consumer prices rising at an annual rate of over 50% – and unlikely to come down fast anytime soon – farmers have raised the possibility of a dual exchange rate.


Fernandez de Kirchner imposed strict quotas, or limits, on international corn and wheat shipments. The policy was meant to ensure ample domestic food supplies, but did little to keep prices under control.

Industry leaders said they did not think Fernandez would resurrect export quotas, because they would hinder his ability to bring in export dollars. But the question will remain until Fernandez makes his policies clear.

Farmers say export quotas kill competition among buyers. As a consequence, wheat and corn sowing fell under Fernandez de Kirchner, while soy planting expanded rapidly, threatening to deplete soils because of the lack of crop rotation.

Wheat and corn planting increased after Macri took office in late 2015, while soy slightly rolled back.


The Peronists have tended historically toward more intervention in the economy than Macri, and could expand price controls on domestic foods to help the growing number of Argentines living in poverty.

Populist champion Fernandez de Kirchner used price agreements with retailers in her effort to control inflation during her presidency.

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