Leading players in Argentina’s agricultural sector believe that Javier Milei’s victory in the country’s presidential election on 19 November will lead to reforms that bolster crop production and exports, according to a report by AgriCensus.
Milei had pledged to make radical changes to promote growth in the country that is facing a range of difficulties including triple-digit inflation, the 20 November report said.
Priorities include closing the central bank, dollarisation, spending cuts, privatisation and leaving the Mercosur – South America’s Common Market, according to the report.
In an interview with a local radio station on 20 November – the day after the election – Milei reportedly said he planned to introduce these priority policy changes when taking up his position on 10 December.
Although Argentina is one of the world’s top exporters of beef, corn, soyabeans and wheat, the country’ grain and livestock producers have been calling for tax cuts and a halt to caps that they claim are holding back exports, according to a Reuters report on 20 November.
Milei’s election offered an opportunity for “radical change” in policy for the grains sector, the country’s main rural associations were quoted as saying by Reuters.
“A great opportunity has opened up to work together to make radical change to the current policies,” the Argentine Rural Society (SRA) said in a statement.
Congratulating the president-elect, major Argentine agricultural associations CONINAGRO said in a statement “we are at the beginning of a new stage”.
The Argentine Rural Confederations (CRA) had called for Milei to work with the farm sector and demanded tax deregulation, the report said.
Milei’s election could boost local farmers’ spending and increase grain prices, Argentine biotech firm Bioceres CEO Federico Trucco was quoted as saying in a Reuters report on 21 November.
“If … there is only one exchange rate and [Milei] removes export taxation that equates for a third of the international price, you might have a scenario in Argentina where the price of grain might double in real dollars to farmers,” Trucco said.
Most Argentine agribusiness traders contacted by commodity price reporting agency Fastmarkets said they expected dollar devaluation to be the first positive change introduced for the agriculture sector.
“This should help out production and boost farmer selling if the spread between the official and real foreign exchange rates becomes lower,” Pablo Santamaria, a broker at Agrosud, told AgriCensus.
The Argentine peso had been in decline for some time and foreign exchange reserves had been low, prompting the government to introduce multiple exchange rates and capital controls, which had proven problematic for exporters, the report said.
At the time of the report, the official dollar exchange rate was 668 pesos/US$.
“If this devaluation occurs, producers will triple their earnings, which may have an impact on wheat and barley sales, which are practically frozen, and also on soyabean and corn sales if producers have enough product to sell,” analyst Javier Preciado Patiño told AgriCensus.
However, having a fluctuating dollar could make products more expensive for the consumer, as well as increase inflation, which was running at a 140% annual rate at the time of the report.
“At first it will be difficult, but I believe that growth will settle down over time,” Patiño added.
Analysts and brokers said it was unlikely Milei would be able to introduce all proposed changes as his Liberty Alliance party was expected to have seven out of 72 seats in the Senate, and 38 of 257 seats in the Chamber of Deputies.
“I don’t know to what extent his lack of congress member support would jeopardise his agenda,” Victor Martins, the Latin America risk manager at Amius, told AgriCensus.
According to Argentine analysts, despite reports of leaving Mercosur and switching the country’s alignment from China and Russia to the USA, trade relations will not see any changes in the near term.
“At first, the end of Mercosur (or Argentina leaving the economic group) could harm Argentine agribusiness, as it would take away preferential access to Brazil’s market, which is huge, but after the initial impact, everyone would win,” Agrural analyst Daniele Siqueira was quoted as saying.
According to Siqueira, a free-market aligned government, which Milei’s administration is expected to be, should make Argentine agribusiness more competitive, due to the removal or at least reduction of export taxes and controls on export volumes, as well as other economic measures.
