Government looks to incentivize exporters in order to maintain official exchange rate

Economy Minister and UxP presidential candidate Sergio Massa has vowed to maintain a AR$350 per US dollar rate until the elections

The special benefit for soybean exporters expires at the end of the month, and the Economy Ministry is searching for ways to accelerate the liquidation of foreign currency. Despite the high uncertainty due to the elections and the reserve shortage of the Central Bank, the ministry is looking to try and maintain the current exchange rate. 

The room for maneuvering is narrow, and some of the options include a new version of the oilseed stimulus program, although the sector says that producers are running “low on grains.” The Economy Ministry is also looking into a differential exchange rate for regional economies and other exports, such as mining.

Government sources confirmed to Herald sister publication Ámbito that although no decision has been made yet, measures “for some specific sectors” are being analyzed. The definition should come shortly. The Central Bank bought U$S1 million on Monday, its 30th day in a row with a positive balance, but achieved it on the backs of the special program which is scheduled to end on September 30.

In addition to helping bolster reserves and keeping the official exchange rate at AR$350 per US dollar until the elections — a promise made by Economy Minister Sergio Massa — this benefit has also helped add 25% of foreign currency to the blue chip exchange rate supply, which has helped keep parallel exchange rates at bay.

Incentives for exports

It is within this context that the government is considering adding incentives to exporters. The proven and most effective way to contain the gap would be to extend the benefits of the program for soybean exporters. According to sector sources contacted by Ámbito, however, 30 million tons have been lost due to the drought and producers have very little volume remaining.

The same businessman estimated that 3.5 million tons were traded in this round, and close to 4 million tons would remain in the hands of producers until the harvest of April 2024. 

At the current price, it would be worth around U$S2 billion. However, liquidating the entirety of soybeans is difficult, given producers’ future obligations. Exporters also have a small amount of soybeans that they bought during this timeframe and have not yet sold abroad.

“In order to sustain the official exchange rate, the government will have to extend the benefits for soybean exporters into October and will probably end up placing more restrictions on any dollar access, which would in turn enlarge the gap between exchange rates and produce more inflation”, an economist who closely follows exchange rate issues told Ámbito. The continuity of this benefit, however, is not the only option the government is exploring.

Is an incentive to mining in the works?

Adding incentives to other exportable products is another option that is also being discussed. “Some sectors are under evaluation”, government sources acknowledged. Some point to regional economies, although at the beginning of the month, Massa had already ordered duty tax be eliminated for several sectors, such as rice, peanuts, grape juice, wine, cider, essential oils, and tobacco, among others.

The Economy Ministry does not rule out the possibility of passing a more comprehensive measure and including other exporting sectors, such as mining, within this limited timeframe. In any case, the margin is scarce. The elections are approaching, the pressure on parallel dollars is increasing, and the exchange rate peace will be key to avoiding a new rise in inflation.

Originally published in Ámbito


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