Recipe for disaster

27 March 2008 By Martin Hutchinson

Argentine farmers are right to protest higher export tariffs. However, as with most commodity and energy exporters, Argentine economic performance depends primarily on world markets. That makes it difficult for the electorate to figure out which economic policies make sense.

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Farmers and their supporters are protesting over new Argentine export tariffs on farm commodities; the protests have forced world soybean prices up 10%. The charges replace a 35% levy on soya sales with a sliding scale with charges up to 95% if world soya prices rise to $600 per tonne. At a price of $465 per tonne, farmers pay a tariff of 44%, resulting in a total tax burden including income tax and provincial levies of 73% of revenues, according to the Argentine Agrarian Federation. The new tariffs are being imposed only four months after the last export tax increase.

Argentina has a population of 40m, growing at 0.9% per annum. Its Gross Domestic Product at official exchange rates is $245bn, growing at 8.5% in 2007, $13,000 per capita on a purchasing power parity basis. Inflation is officially 8.5%, the current account surplus 3% of GDP and the budget surplus 0.7% of GDP. Argentina was ranked 105th on Transparency International's 2007 Corruption Perceptions Index, down from 93rd in 2006.

Argentina's Merval share index is down 4% since 1st January 2008.

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