“Wine dollar” sparks industry demands for differential exchange rates

Other industries want in on the special exchange rates after new "Malbec" dollar follows "soy" dollar

Economy Minister Sergio Massa’s announcement of an export incentive for winemaking and regional economies has led other industries to demand their own differential dollar rate. Today, companies are exporting and importing at an official rate of AR$ 206, almost half the financial dollar rates.  

Last weekend in Mendoza province, Massa announced “a mechanism to strengthen exports for regional economies,” that will start with the winemaking industry. All that is known about the so-called “malbec dollar” is that it will start on April 1. Official sources said that it will be an “export incentive” over a far longer timeframe than the “soy dollar”, since it could extend up to the end of the year. 

People in the wine sector say they don’t have a lot of information about it.

 “A different dollar rate or a reduction in export duties would help a lot, because the dollar rate is outdated and we can already feel the loss of competitiveness,” said sources from a large wine company. Yet at the same time, they said the situation for wine is very different from soybeans, since it cannot be “stored,” and they must meet the deadlines established in their contracts.  

One of the most probable scenarios is a 4.5% reduction in export duties. In fact, something similar may happen with soybeans. Despite the Central Bank’s need for dollars and a late gross crop, the Secretariat of Agriculture doesn’t want to implement the “soy dollar” a third time, because of the resulting distortions in the market, and also because the IMF is against it. So the most likely scenario today is a temporary reduction of export duties. Sources in the Economy Ministry say the decision will be “pragmatic.”  

Knowledge economy

The knowledge economy is another sector demanding export benefits. Today, companies can obtain dollars freely —without being forced to liquidate them at the official rate — for up to 50% of their incremental exports, but they are asking for that to be increased.  

On Tuesday morning, at the Ministry of Productive Development in downtown Buenos Aires, the Knowledge Economy Secretariat presented the EconAr fair, which it organizes together with companies in the sector. The fair will gather companies, entrepreneurs, and universities in La Rural exhibition center from March 17-19, to promote the tech sector with free workshops, stands and even job offers. 

During the presentation, at a table that included Knowledge Economy Secretary Ariel Sujarchuk and Argencom business chamber executive director Luis Galeazzi, the issue at hand was the implementation of the so-called “techno dollar”, which enables companies to access some of the dollars from their export earnings to pay salaries. Galeazzi commented that “it would be good if the access to dollars could grow up to 50 or 80%”. 

Sujarchuk answered that the decision grants access to 30% of dollars earned from incremental exports, with the possibility of rising to 50% if the companies conduct new business and investments. He also said that in June they will perform a first evaluation of the decree, allowing them to “assess” the policy.

The industrial sector is also demanding export benefits. Sources within the Argentine Industrial Union (UIA) said that they are asking the government to lower export duties and improve reimbursements, especially for exporting sectors with high added value –and not all industries, which would be perceived as a whole new exchange rate.   

Wood Industry Federation (Faima) business leaders are outright demanding a differential exchange rate. According to Faima head Román Queiroz, the sector is in crisis due to an 80% drop in exports, internal demand that cannot absorb wood supply, and sawmills “having serious problems”.  

The businessman said that Russia is a big provider of wood, and its exit from international markets may create an opportunity. “We are expecting the details of the measures for regional economies, but we are not sure that we will get a differential dollar rate, because every sector is asking the government for that,” said Queiroz.

Industrial SMEs are going to make a similar claim. “We have been asking for an “SME dollar” for quite some time, we do it every time they make a new announcement like this one about wine,” said Daniel Rosato, head of Industrial SMEs Argentina (IPA). “We need it to sustain our exports, some sectors like capital goods have stopped exporting because of the exchange rate,” he added.   

Regarding whether the dollar rate is outdated, Ecolatina consultant Santiago Manoukian explained: “The exchange rate is not incredibly outdated, though it is significantly so. The multilateral exchange rate is 23% more depreciated than in December 2019, but it also had an 8% improvement since November.” 

Moving forward, he doesn’t believe the IMF deal and the lack of Central Bank reserves are causing the rate to grow more outdated, although it could happen closer to the elections, as a sort of “anchor” against inflation.

Originally published in Ambito.com / Translated by Agustín Mango


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