A study carried out by the Rosario Stock Exchange (BCR) anticipated that the reduction in withholdings announced by President Javier Milei last week, combined with the elimination of the exchange rate gap since April, will cause the Argentine countryside to increase its production by approximately 13 million tons. In ten years this would translate into an additional contribution of US$28.8 billion to the economy.

The analysis carried out in this report is based on the “Agmemod Model” (for Agricultural Member State Modelling), designed for the agri-food markets of the European Union and adapted to the situation in Argentina, taking into account its “productive, economic and institutional characteristics.”

The measurements were taken based on the reduction in withholdings announced by the President at the opening of Expo Rural 2025. He stated that the rates for corn, sorghum, wheat, and barley will remain at 9.5%, while the withholding rate for sunflowers will go from 7% and 5% to 5.5% and 4%. Meanwhile, the rates for soybeans will drop from 33% and 31% for beans and by-products, respectively, to 26% and 24.5%.

In addition to the measure, the Rosario Stock Exchange also highlights that this is in addition to “a change in the country’s macroeconomic context that took place in April of this year when the partial liberalization of access to the Free Exchange Market was announced, which operated in practice as a currency unification, reducing the gap between the ‘official dollar’ and the ‘financial dollars’ to practically zero.”

Thus, the model projects that by 2035, agricultural production will increase by 8% compared to the previous scenario, with higher withholdings and an exchange rate gap.

“The reduction in rates and the virtual elimination of the exchange rate gap has meant that the proportion of ‘dollar cash’ received by producers on the FOB price without soybean withholdings is now at levels close to the highest since 2012, comparable to the 2016-2018 period. For other products, it is still below the period when rates were 0%, but close to 100%,” the analysis highlights.

Regarding the country’s macroeconomic situation, it also points out that when “there is a gap, although the producer receives fewer ‘dollar bills’ for their sales, they also pay fewer ‘dollar bills’ for their costs, so the impact of the gap is seen in the dollar exchange rate at which the producer can ‘dollarize’ their profitability once all production costs have been deducted.” In this same sense, the work highlights that “both the elimination of the gap and the reduction of withholding rates directly impact producers’ decisions, incentivizing them to hire more labor, allocate more surface area and/or use better technology.”

How much the field projection will increase, according to projections

In turn, it anticipated that by 2035, grain production will reach 172.3 million tons, with a production value of US$50.1 billion, based on prices projected by the model itself.

Taking into account the expected variation, this implies that the value of agricultural production would increase by US$28.8 billion between 2025 and 2035.

“This injection of added value will result in an increase in the level of activity that exceeds primary production per se and involves, among other things, more freight, sales of inputs, financial and intermediation services, services related to storage and packaging, greater activity for rural contractors, for the agro-industrial complex and for service providers associated with exports, among others,” the study concludes.

Originally published on Ámbito