Argentina authorizes exporters to utilize 25% of dollar earnings for soy purchases

Argentinian agro-export companies will be allowed to freely access 25% of the foreign exchange they generate to buy soybeans during the month of September, according to a decree published on Tuesday (5/9) in Argentina’s Official Gazette. This government decision aims to improve the domestic soybean price and accelerate grain sales.

While initially announced by the Agriculture Secretary during a press conference on Tuesday (29/8) as being exclusively for soybean imports, the decree does not specify such a limitation. A source from the Secretary’s office stated that these funds could be used for both domestic and international purchases.

“Seventy-five percent (75%) of the export proceeds of the goods (…) must be brought into the country in foreign currency and traded through the Free Exchange Market (MLC), while the remaining twenty-five percent (25%) will be available freely,” according to the presidential decree.

Due to its low reserves, Argentina automatically converts dollars entering the country for export into pesos — currently set at 350 pesos per dollar until the end of October — while access to foreign currency for product imports is heavily regulated by the state.

With this measure, agro-exporters can exchange 25% of the foreign currency on the “CCL” or “MEP” alternative exchange markets, where assets are bought in pesos and converted into dollars to preserve purchasing power against the devaluation pressure of the Argentine peso.

As a result, the implied exchange rate at the close of trading on Monday would be approximately 455 pesos per dollar, well above the official parity. Analysts estimate that the government will collect around 2.5 billion dollars with this measure.

Due to a historic drought described by the government as the worst on official record, the 2022/23 soybean harvest amounted to 25 million tons, down from 44 million tons the previous season. According to Agriculture Secretary Juan José Bahillo, current soybean stocks stand at around 8 million tons.

Imports

Faced with the crop failure, Argentinians have sought more soybeans abroad, particularly in Brazil, to process and export meal and oil. The Argentine Chamber of Grain Processors and Exporters, CIARA-CEC, stated in its latest activity report that in the first half of 2023, the volume of processed soybean fell by 26% compared to the previous year, totaling 14.9 million tons.

Source: Globo Rural

To read the original report, visit: https://globorural.globo.com/economia/noticia/2023/09/argentina-libera-exportadores-a-usar-25percent-da-receita-em-dolar-para-compra-de-soja.ghtml

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