Bean better

Argentinian soya held back by politics, taxes and currency.

In contrast to its neighbours, Argentina experienced an unprecedented drop in soya exports in 2020. Argentinean crops decreased in productivity and lost appeal of its produce compared to global powerhouses such as US and Brazil, which offered more competitive prices.  

Argentine soya producers, despite having privileged geographical conditions, are hindered by state taxes and dismal peso-dollar exchange rates. In addition, a particularly dry January and February will negatively affect the amount of soya production, expected to drop to 45 million tonnes in 2021 from 49 million tonnes in 2020. 

Nevertheless, the export of soya is still a very profitable business for a country which has experienced numerous financial crisis in the last three decades. The Centre for Cereal Exports of Argentina reported the country registered USD 3,950 million in currency income from grain exports, mostly soya between January and February 2021. This is the highest income since 2016 and generates a meaningful contribution to the Argentinean economy.

A partner at an agricultural brokerage in Argentina confirmed, “Despite the bleak situation in Argentina, soya producers are not changing sector. Although it is less profitable than many years ago, it is still profitable. The main challenge is that the lower profits prevent producers from investing in the growth of their businesses. Furthermore, there is interest from foreign companies, which are less affected by the devaluation of the local currency, to partner with local powerhouses to force small and medium-sized producers out of the market.”

“There is interest from foreign companies, which are less affected by the devaluation of the local currency, to partner with local powerhouses.”

Partner, agricultural brokerage, Argentina

Argentina, like all Mercosur members, would significantly benefit from the completion of a EU-Mercosur deal which would almost eliminate EU import duties on Mercosur’s grain and, therefore, soya. Furthermore, experts call for greater infrastructure integration between Mercosur members with a specific focus on waterways, the main bottleneck to grain transportation in the region. 

The broker explained that the EU-Mercosur deal could be transformational but geopolitical barriers remained, “Mercosur would profit tremendously by unleashing its waterway potential and a first significant measure would be to build a new ship lock and navigation channel in the Itaipú dam, but Argentina is not interested in partnering with Uruguay and Paraguay.”

“The country is held back by a political problem, the government has no interest in really pushing for trade and economic integration with its neighbours.”

Trader, commodities firm, Argentina

A commodities trader in Buenos Aires sees similar geopolitical hurdles facing Argentina, “The country is held back by a political problem, the government has no interest in really pushing for trade and economic integration with its neighbours. This is a pity as Latin America could become the main commodities stock market competing with NYSE Chicago if proper integration measures were put in place.”

 

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