Argentine President Cristina Fernandez said on Thursday she would scrap taxes on corn and wheat exports for smaller farmers, but the measure is unlikely to satisfy the demands of protesting growers. Farmers in the country, a leading global grains exporter, have been locked in dispute with Fernandez's government for more than a year over export levies on grains, particularly soy - the nation's top export earner.
A prolonged drought has fuelled farmers' bad mood and last week they held an eight-day strike to protest government agricultural policies. Fernandez said the government would give 100 percent rebates of export taxes paid on corn and wheat to small- and medium-sized growers. "We need to create incentives for small- and medium-sized farmers to go on sowing and investing," she said in a televised speech at the presidential palace.
She said the measure would cost the state 50 percent of expected revenue from corn and wheat export levies, which are seen plunging for a second straight year as drought and economic uncertainties lead farmers to shun the two cereals. They have been angered by export freezes on corn and wheat, which remain in place as the government seeks to safeguard domestic supplies and tame inflation.
Farm leader Eduardo Buzzi, president of the Argentine Agrarian Federation, reacted cautiously to the announcement on export levies. "Our lack of trust is justifiable. The Argentine Agrarian Federation will only support this once we know exactly how it's going to work and when it will come into force," he told TN television. Farmers have previously called for corn and wheat export levies to be scrapped altogether and they have criticised tax rebate or compensation schemes offered by the government.
Private forecasts expect grains export taxes to bring in more than $7 billion next year, making them a vital source of tax revenue for the government as it battles to meet rising debt repayments. However, most of that would come from soy. Corn and wheat export levies on the 2008/09 crop will total $400 million, according to Rosario grains exchange, reflecting steep drops in production due to the drought that in turn hit exports.
Farmers are currently planting the first of the 2009/10 corn crop and Buenos Aires Grains Exchange expects growers to dedicate 24 percent less land to the grain. They recently finished sowing new season wheat on a growing area that is 40 percent smaller than last year, according to the exchange.