Higher dollar for agro and new import tax: Argentina prepares new package with IMF endorsement

After an announcement from the IMF (International Monetary Fund) earlier this Sunday (23), that it expects to reach an agreement with Argentina, the country’s Ministry of Economy should implement in the next few hours a package of measures dealt with by the Fund, with a partial devaluation of the exchange rate.

According to the press in the neighboring country, the government will increase the amount for purchasing dollars (the “dollar ahorro” or “savings dollar”, which Argentines can legally buy), with the unification of the so-called “dollar tarjeta” (in which expenses in pesos are converted by the country’s central bank with the card operator at an exchange rate close to the parallel, or “blue”), with a limit of US$ 300 (R$ 1,430) per month.

On average, 900 thousand people buy US$ 150 (R$ 716) per month. Both will be unified at 30% Country Tax (acronym for For an Inclusive and Solidarity Argentina) plus 45% presumed profit.

The “Qatar dollar” (tourism) is still valid for purchases that exceed US$ 300 per month. The measures start to be valid from this Monday (24).

The IMF demands that the Argentine government devalue the dollar to avoid a default. Economy Minister Sergio Massa and Vice President Cristina Kirchner refuse to raise the official exchange rate sharply — for fear of spiraling inflation.

The government will also increase the value of the dollar for exports of grain crops such as corn. The portfolio hopes to add US$ 2 billion (R$ 9.5 billion) in exports with the agro dollar and, at the same time, increase the tax collection that had been impacted by the serious crisis that the country faces.

The “agro dollar” goes from 300 Argentine pesos to 340 pesos, for exports that are settled by August 31, 2023.

Argentina will also modify the country’s tax rules for the use of dollars from an import pool.

A rate of 25% in the country will be generalized for practically all services, with some items that will have particularities. The purchase of goods abroad, for example, will have a country tax of 7.5%, the same estimated for freight services. Sectors such as education and health will be exempt.

For the purchase of imported goods, the payment of 7.5% tax is generalized. Imports linked to fuels, lubricants and imports linked to the basic basket will not pay the tax. Banks, for goods and services, will act as collection agents for this tax.

According to the Clarín newspaper, the measures should not spare the Special Customs Area of Tierra del Fuego, which should make electronic products more expensive.

The application of this tax package, according to Argentine newspapers, should provide additional revenue close to 1.3 trillion pesos, equivalent to 0.8% of the country’s GDP (Gross Domestic Product).

“For Argentina, this is an issue to be resolved, the best thing we can do is to have our own export program, our reserve consolidation regime. Argentina needs to have a design of its economic policy so that, in the long term, it has mastery of its development policy and economic policy”, said the Minister of Economy, Sergio Massa, this Sunday night, in an interview with the Argentine channel C5N.

Massa pointed out that the agreement reached removes the discussion from the IMF until the end of the year. The minister said that there will be no new reviews with the body until the end of November, when the electoral calendar ends and there is an elected president. “This will give us the possibility that that neighbor we have in the neighborhood, which is the Fundo, which [former president Mauricio] Macri brought here, will not be a factor in the campaign.”

The minister said that Peronism must be self-critical when comparing the last few years —of “fat cows”— with the most recent drought period, which affected agribusiness. “We have to do a self-criticism, and learn to review our own mistakes, ask for forgiveness. Just as we had 36 months of job creation, we also have to learn from our mistakes and move forward.”
According to Massa, the agro dollar will be a necessary adjustment, as it is necessary to improve exports to increase reserves. “It impacts 140 regional economies — on crops like rice and tobacco. In this case, the soybean complex was not included, as we are outside the harvest period.”

With other conservative and far-right opposition favorites, the decision means Argentina’s next president, to be chosen in October’s elections, is likely to be more market-friendly, a boost for hard-hit investors in the debt-ridden country.

“The local market can see with good eyes that the electoral landscape now has moderate presidential candidates, pro-market and who know the investors,” Javier Timerman, of Adcap Grupo Financiero, told Reuters, warning that many still have doubts.

Argentina struggles with inflation of more than 100% and a weak currency, the Argentine peso, which has lost about 25% of its value against the dollar this year despite tight capital controls that have slowed its decline.

Earlier, the IMF had signaled positively with a review of the terms of a loan of US$ 44 billion (R$ 210 billion, in current values) that the South American country has with the entity.

“The teams from the Ministry of Economy and the Central Bank of Argentina and IMF staff have completed the core aspects of the technical work of the upcoming review,” the IMF said on Twitter.

The South American country must pay the IMF around US$ 3.4 billion (R$ 16.2 billion) between July 31 and August 1, at a time when the BCRA (Argentine Central Bank) net reserves are in the red at around US$ 6.5 billion (R$ 31 billion).

Source: O Globo

Read more: https://oglobo.globo.com/economia/noticia/2023/07/21/dolar-mais-alto-para-agro-e-novo-imposto-sobre-importacoes-argentina-prepara-novo-pacote-com-aval-do-fmi.ghtml

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