Argentina Macri Said to Consider Suspending Soybean Tax
This article by Pablo Gonzalez for Bloomberg may be of interest to subscribers. Here is a section:
The policy will be decided on Dec. 10, as only on that day will Macri know with certainty how much money the Central Bank has, the second person said. If approved, the window would close once the new soybean crop arrives in March. That crop would pay exports taxes of 30 percent.
“The plan will be successful if farmers are allowed to buy dollars after selling their crops.” Gabriel De Raedemaker, vice president of the Argentine Rural Confederation, said from the town of Oliva in Cordoba province. “A few will feel tempted to sell just to get pesos under a threat of devaluation.”
Macri has also vowed to lift currency controls as soon as he takes office Dec. 10, a move that investors see leading to a devaluation of as much as 35 percent for the peso, which would further help farmers trying to sell abroad.
The Kircheners are out and a new potentially reform minded administration is in. Macri will face a great deal of opposition in attempting to upset the status quo so it is too early to speculate on how successful he will be. Some early milestones which may offer an indication of how serious he is about reform will be whether he follows through on floating the currency, how he deals with the nation’s creditors and how successfully he can reignite the export sector not least agriculture.
The Blue rate for the Peso is currently at 14.9 versus 9.64 for the official rate so a devaluation would put pressure on any Peso deposits stranded by currency controls. This is an issue for major multinationals like Coca Cola which have being doing business in Argentina but have been unable to repatriate profits. This means they will take paper losses on their Peso deposits following the devaluation but these would then potentially appreciate as the economic situation normalises. This article from Bloomberg carries more detail.
Soybeans have more than halved since 2012, falling steadily over the last three months, but rallied today to form an upside key day reversal. This suggests the Argentinean election news may have “sell the rumour, buy the news” characteristics. A clear downward dynamic would be required to question potential for some additional upside.