(Photo: Presidents from Argentina and France, after announce the FTA EU-Mercosur)

Writes Javier Preciado Patiño*

Buenos Aires, August 7th. The witnesses couldn’t believe what they were hearing. “There is no chance to review it. It’s a taken decision, and it’s my own decision”. The words surged from Argentina’s President Mauricio Macri and were related to the FTA agreement between the Mercosur and the European Union.

There are some concerns about this agreement in the soybean crushing industry. As everybody knows, Argentina is the first soybean meal and soybean oil world supplier, thanks to its industrial pole along the Paraná River. This pole is able to crush more than 70 million metric tons per year. In fact, here is placed the world’s largest crushing plant, owned by Renova (a JV between Glencore and Vicentin), where 30,000 tons of soybean are crushed every day.

Currently, the Government established a 18% export tax for the soybean complex plus AR$4 per dollar, that rounds a 28% final tax. But Government eliminated the historic gap between the bean and the byproducts, usually fixed at 3 percentual points. From the ’90 to the present this gap boosted the investments made by the oilseed crushing industry.

The problem is that in the recent agreement with the European Union, Argentina accepts to remove export taxes for all products, except for the soybean complex, where Government commits itself to not re-establish the gap and that this tax will not surpass 14% of the FOB price.

Why the EU is so interested in the elimination of export tax by Argentina? It’s just not a problem of the oilseed industry. The main concern is that when the country establishes export taxes for products like corn, wheat, soybean, other industries like poultry, eggs, milk, beef, pork, etc., access to a lower commodities prices that the same industries in other countries, creating “artificial” competitiveness. During decades Argentina argued that if the EU accepted to eliminate its subsidies to the agriculture, Argentina did it. As the answer always was no, the country maintained its export taxes framework, that, on the other hand, is accepted by the WTO.

Friendly fire

But inside the Argentinian grain value-chain there is heavy opposition to the export tax gap in some individuals in the farmers’ unions. They claim that farmers are subsidizing the oilseed industry via this 3 percentual points gap between the bean and the byproducts. Clearly, the Agriculture, Livestock and Fisheries ministry, Mr. Luis Miguel Etchevehere is one of those people.

“Is now or never”, Etchevehere and his Chief-Cabinet Santiago del Solar would have said when discussion with the EU for the Free Trade Agreement was near to close. Our sources think that both influenced President Macri to accept the elimination of export taxes and the gap in the soybean complex as if it were a condition of the Europeans.

Despite the commitment has been taken just with the EU, our sources warn that it will spread to other commercial partners of Argentina, like Asians, the largest purchasers of soybean and its byproducts. “They will claim ‘me too’ when the FTA is signed”, a source told to eFarmNewsAr.com.

Officials from the oilseed industry lament the Government’s decision. “We were in India, trying to sell sunflower oil to this market and Bangladesh when we were alerted that in Buenos Aires, a new decree eliminated the export tax gap between the sunflower grain and the oil. It’s a contradictory signal that unsettled us just when we were in front of the foreign buyers”, he added.

Industry intended to convince the Government authorities to review this policy, but they only heard the words with which this article starts.

*Agricultural engineer and founder of eFarmNewsAr.com