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ECONOMY | 28-11-2022 12:35

Argentina's government moves ahead with second run at ‘soy dollar’ scheme

Dólar Soja 2: Government hopes to boost reserves by US$3 billion with a second run at agroindustry-aimed programme.

The national government is moving ahead with the implementation of a "Dólar Soja 2" plan offering soybean producers a preferential exchange rate of 230 pesos per greenback for two months.

The initiative started this week and will be in force until December 30. It aims to boost the reserves of the Central Bank by more than US$3 billion. The preferential exchange rate will be 230 pesos per greenback, Agriculture Secretary Juan José Bahillo told reporters.

"The DNU emergency reinstating the programme will come out on Monday. It is a second opportunity remaining open for a period of 31 days until December 30, under the same conditions as last time," remarked the Secretary of Agriculture, Livestock and Fisheries.

The figure is well above the official greenback rate of around 166 pesos per dollar at the wholesale level and 170 pesos per dollar for the general public.

The team at the Economy Ministry, headed by Sergio Massa, has already finalised the details of the new programme with technicians representing the main grain exporters who benefitted from a similar scheme back in September. 

Argentina’s government is aiming to raise foreign currency inflow by US$3.5 billion or more while the scheme is in place. It wants to meet the reserve accumulation target of US$6 billion agreed with the International Monetary Fund (IMF) under the country’s US$44.5-billion debt repayment programme.

Officials are also said to be considering the potential inclusion of regional economic producers into the scheme, though those details are still under discussion.

Earlier this month, while making a visit to the wine-producing province of Mendoza, Massa promised to offer regional exporters access to a preferential rate in an attempt to boost income.

In a speech to businessmen last week, Argentina’s economy minister said it would be necessary to "work with each sector" to find incentives to improve production levels, leaving the door open for new measures.

On Monday, Massa vowed to deliver "a programme of tax reductions in regional economies." 

 

‘Temporary improvement’

Many producers of soybeans, Argentina's main crop, keep their harvests in stock awaiting better sales conditions. According to a report by the Rosario Stock Exchange, some 8.6 million tonnes of soybeans remain to be sold.

The measure met with criticism from representatives from the agricultural sector, who called for the provision to be extended to exporters from other sectors.

"The country's foreign exchange needs cannot always be sustained by the same sector, nor can we always benefit the same ones and harm the smaller players," said the Federación Agraria Argentina, which groups small and medium-sized producers, in a statement.

"It is necessary that Argentina counts on a comprehensive agricultural policy meeting the needs of all producers which contains the regional economies and contemplates the dramatic situation we are suffering as a result of drought, frost and other climatic inconveniences," it added.

The president of the CIARA chamber group, Gustavo Idigoras, described the measure as a "temporary improvement," adding that "it will have a direct impact on the price of soy for the domestic market.”

In a statement, the organisation pointed out that "the decision to sell soybeans is always in the hands of the producer and it will be they who decide when to sell.”

The plan is to "increase reserves so that the economy can reach the end of the year with US$10 billion freely available to have a back-up and so that tomorrow we are not unbalanced by speculation," Industry Secretary José de Mendiguren told Radio Futurock on Monday.

"Nobody wants several exchange rates but we have to normalise and stabilise the economy. It is a solution, a tool for the exceptional circumstances which Argentina is experiencing today," said De Mendiguren.

The first version of the "soy dollar" programme ran from September 5 to 30 and led to the liquidation of around US$8 billion in foreign currency. As well as boosting Central Bank reserves, it also left the Treasury to improve its fiscal deficit. 

Argentina is one of the world's largest exporters of soybean products with the grain and its derivatives bringing in more than US$10 billion annually in government revenue on total sales of US$40 billion.

The country's gross international reserves are around US$37.6 billion but analysts point out that net reserves are much lower.

 

– TIMES/NA/AFP

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