Argentina could increase grain production and exports if agricultural taxes are abolished

Without taxes, the country’s total sown area will reach 43.4 million hectares by 2036, a 5.4% increase from the baseline.

The elimination of agricultural export taxes in Argentina could dramatically increase grain production and the country’s export revenues, and ultimately, overall tax revenues. This is the conclusion reached by analysts at the Rosario Grain Exchange, Reuters reports.

As noted, the exchange’s analysis modeled the potential development of Argentina’s agricultural sector through 2036 under two scenarios: one in which export duties remain unchanged, and another in which they are gradually phased out over two years and completely eliminated by 2028.

“According to the exchange, the country’s total sown area, excluding taxes, will reach 43.4 million hectares by 2036, representing a 5.4% increase over the baseline, while total production of key crops will increase by 10.1% to 182.6 million tonnes, primarily driven by soybeans and corn,” the analysts believe.

Argentina’s agricultural exports will increase by 14.1 million tonnes compared to the baseline scenario, increasing annual export revenue by $6.4 billion and bringing the sector’s total exports to $50.5 billion by 2036, with soybeans accounting for most of the increase.

The report also refutes the notion that reducing export duties will lead to a long-term “hole” in public finances, which rely heavily on US dollars from abroad.

“While the federal government will initially lose revenue from duties, increased farm income, investment, and broader economic activity will offset the impact through increased revenues from income, banking transactions, and other taxes,” the analysis notes.

The report also asserts that under this scenario, the Argentine government will begin to receive increased tax revenues starting in the 2029/30 marketing year, while the provinces will benefit immediately because export taxes are not shared with them.

“By 2036, combined annual tax revenues at the national and provincial levels will be $1.29 billion higher than if the duties remain in place,” the experts conclude.

Tags: export, grain, agricultural products, Argentina