Farmers are lobbying against the government’s proposal to sweeten an offer on its overseas debt with payments tied to agriculture exports.
Economy Minister Martín Guzmán, who’s leading talks to restructure US$65 billion of foreign debt, has put the idea on the table, though some creditors favour coupons linked to economic growth.
The debt sweetener – which would trigger a payment whenever agriculture exports hit a threshold that’s not yet been specified – has unnerved farm leaders because it may mean keeping in place unpopular taxes on shipments indefinitely.
“A measure like this would mean export taxes couldn’t be scrapped until the bond matures,” Argentina’s main farming associations said in a letter to the government seen by Bloomberg News. “That would impede tax-relief policies when prices fall or there are weather disasters.”
Ultimately, says the letter sent last week, the sweetener would curtail investments in crop production. That’s anathema to farmers, who want to “ensure our future work is not tied to the whims of a bond.”
The relationship between Argentina’s government and its farm industry, which is key to both tax revenues and bringing in dollars, is straining.
President Alberto Fernández took office six months ago and hiked export taxes. More recently, the central bank has taken steps to prompt farmers to sell their soy harvests. Dual foreign-exchange rates are also driving concerns about inputs, like fertiliser, becoming expensive.
Meanwhile, Fernández has taken control of Vicentin SAIC, a bankrupt soybean processor, in a move that farmers fear could upset grain markets.
Argentina’s crop exports were valued at US$23.7 billion last year.
by Jonathan Gilbert, Bloomberg