Argentina’s agroindustrial sector anticipates a significant decline in dollar inflows in the near term, subsequent to the conclusion of a temporary decrease in export duties. Exporters caution that the settlements of proceeds may decline by over fifty percent. Foreign currency supply from the agricultural sector may experience a shortage until November.
The government is meticulously observing fluctuations in exchange rates, the dynamics of the futures market, and the trends in interest rates. After briefly surpassing AR$1,300 at the start of the week, the dollar closed Tuesday at AR$1,275 at Banco Nación. The economic team expressed a sense of relief. As the elections approach, there is an expectation that a stable exchange rate will play a crucial role in maintaining inflation at manageable levels. However, challenges are emerging on the supply side. Exporters anticipate that the remarkable influx of dollars observed in the first half of the year will gradually diminish in the near future. An informed industry source indicated that the decline will surpass 50%.
Supported by the recent reduction in export taxes, the agroindustry had been liquidating approximately US$200 million daily; however, they anticipate this amount will decrease to US$100 million or lower in the short term. This situation may persist until November, contingent upon whether the government opts to implement an alternative preferential exchange rate, a scenario that remains on the table for consideration.
“Just as the dollar hovered around the lower half of the exchange rate band in the first half of the year, it will shift to the upper half in the second,” stated financial analyst Christian Buteler. Private consulting firms concur that demand is expected to increase, influenced by seasonal factors and the attributes of the existing model, including currency appreciation and trade liberalization. The Oilseed Industry Chamber (CIARA) reports that the sector generated US$15.4 billion in the first half of the year, reflecting a 40% increase compared to the previous year. However, despite a historic influx of agricultural capital, ensuring currency stability incurs significant expenses. The rise in interest rates has escalated the potential for an additional economic downturn.
In May, economic activity contracted by 0.1% on a month-on-month basis, as reported by INDEC. In June, mass consumption experienced a decline of 0.8% year-on-year and also saw a slight decrease in seasonally adjusted monthly terms, as reported by Scentia, a consulting firm that specializes in retail data. The consequences of the tax break’s expiration are already apparent at the upstream level. “What’s being traded now are the sworn declarations from last month,” a grain market trader remarked to Ámbito. “However, in the context of new agricultural sales, there is a complete stagnation.”
During discussions with key players in the business community, the industry persists in advocating for its position regarding export taxes. However, the budget constrains the Economy Ministry’s flexibility, while President Javier Milei’s fiscal commitments remain steadfast. Economy Minister Luis Caputo accepted the challenge, addressing the agroindustry in a public statement. He emphasized various initiatives already put in place for the sector and remarked that “the government’s obsession is with export taxes,” urging for “trust and patience.” Currently, the data indicates a discrepancy, suggesting that the sector is likely to experience a deceleration in sales as we approach the year’s conclusion.