Argentina’s Change of Course

Argentina is expected to be the world’s largest exporter of soybean meal for the current marketing year, the third largest corn exporter, the fourth largest soybean exporter, and the sixth largest wheat exporter. Argentina also exports sizable amounts of beef. Argentina is a player in global markets despite the significant domestic economic challenges it faces. The country is debt ridden, suffers from high inflation (more than 142 percent in October), plagued with poverty, and has negative foreign currency reserves. Moreover, the Argentinian government imposes export taxes of 33 percent on soybeans, 31 percent on other soybean products, and 12 percent on corn and wheat.

Into this economic malaise enters Javier Milei, a libertarian and self-described “anarcho-capitalist” who won the Argentinian presidency. Milei, an economist and former TV pundit, has proposed several “radical” policies to right the Argentinian economic ship. The most radical of these proposals is the “dollarization” of the economy. Argentina would ditch its currency (peso) and conduct all business in U.S. dollars. Milei also said he would repeal the taxation of agricultural exports. Already within the first week of taking office, the economic team installed by Milei has implemented several changes including the devaluation of the peso by 50 percent, slashing government spending and subsidies, and indicating export taxes on some grains would be raised, although no specifics were provided on which grains would be subject to the higher tax.

What might these policy turns mean for U.S. agricultural producers? U.S. commodity prices and competitiveness in global markets is sensitive to changes in competitors’ currencies. As such, the devaluation of the Argentinian peso would tend to be bearish for U.S. prices. Milei’s goal to repeal the export taxes on grains and oilseeds could stimulate crop production and pressure U.S. prices as well. Reuters reported that the last time Argentina scrapped its export taxes, eight years ago, wheat production in the country climbed 52 percent.