Foreign media, September 5 news: Argentina’s Economy Minister Sergio Massa announced on Sunday a special exchange rate for the country’s soybean producers to incentivize exports to earn foreign exchange and ease the pressure on currency depreciation.
Soybeans are Argentina’s most important export commodity. Under the new policy, exporters can settle soybean export earnings at a rate of 200 pesos per dollar, which is more profitable than the official rate of 139 pesos excluding taxes.
Massa told a news conference on Sunday that the measure, which boosts foreign exchange reserves, is crucial to overcoming economic pressure. More than a dozen agribusiness leaders attended the meeting.
Massa added that soybean exporters have reached an agreement with the government to sell at least $5 billion in September and $1 billion in soybeans and manufactured goods in the first 72 hours of the measure.
Massa said an emergency decree would be announced in the next few hours to make the policy official. Exporters’ exchange rates will return to normal levels in October, he added.
Massa, who started as economy minister about a month ago, is Argentina’s third economy minister since July. Massa seeks to reverse a months-long decline in the central bank’s foreign reserves. Argentina’s central bank has just over $2 billion in net reserves left by some private estimates, escalating fears of a devaluation of the peso.
The Argentine government levies a 33 percent tax on soybean exports, which is also a major source of revenue and dollar reserves. Argentine exporters also have to convert dollars earned from exports into pesos at the official exchange rate. Because the black market rate of the peso is far below the official rate, exporters choose to hoard goods and wait for the peso to depreciate significantly before exporting at a more favorable exchange rate. Importers, on the other hand, import in advance to take advantage of the current relatively low exchange rate. Exports rose just 7% year-on-year in July, while imports rose 44% year-on-year, according to government data. Argentina recently returned to a trade deficit after two consecutive years of trade surpluses.
Massa will travel to Washington this week with his economic team for the first in-person talks on Argentina’s $44 billion plan with the International Monetary Fund. Argentina’s foreign exchange reserves are still far from the IMF’s planned net reserves target. Massa said the new measures are aimed at lowering inflation, narrowing the exchange rate gap and stabilizing the economy.