Argentine farmers oppose idea of linking bonds to agricultural exports

The Argentine government has included a proposal to link the interest rate on bonds issued to restructure the country’s debt to its agricultural exports in the most recent offer it made to holders of about US$65 billion in sovereign bonds.  The proposal was an appeasement to try to make an agreement with the title holders but it displeased the Argentine farmers.  However, these guarantees, which would lead to payments if agricultural exports reached a certain level, were not enough to convince bondholders.

Producers, for their part, fear that these guarantees will be an incentive for the government to keep export taxes unchanged at the current levels of 33% for soy and soy products and 12% for corn and wheat. Argentina is an important international supplier of the three crops.  Argentina’s main agricultural groups have sent a letter to the government in which they say their members are “alarmed” at the idea of ​​linking bond interest rates to exports. “This financial instrument would generate negative incentives for agricultural production,” they said in the letter.  “This would mean that export taxes would not be reduced until the bonds expire … compromising our ability to generate jobs, investment, and economic reactivation,” they pointed out in the document.

Argentina’s economy, hit by isolation measures against the coronavirus since March 20, is expected to shrink by about 9.5% this year.

Source: Reuters

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