South America Calling

New, apparently punitive, measures adopted by Argentine tax officials at port are delaying grain shipments.

The increased checks are exasperating exporters and causing them to fret about the effect on soy and corn shipments.

Since October, the Argentine Tax Authority (AFIP) has been carrying out draft surveys on most grain vessels. This process is outmoded at Argentine ports, which have electronic means of measuring cargo volumes, and delays departure by anything from 2 to 6 hours, exporters complain.

Meanwhile, officials have become much more vigorous in checking vessel permits, conducting multiple examinations per shipment, and have stepped up drug controls, despite having insufficient teams to implement the greater number of checks.

The result has been mounting delays.

According to exporter figures, between Oct. 12 and Nov. 30, some 60% of the 347 grain vessels docked at Argentine ports suffered delays because of these measures. The average delay was 15 hours, which when vessel rental can reach $40,000 a day, translates into a major extra cost.

Exporters, who don't want to go on the record on the issue, believe the move is designed to pressure them into settling a $600 million customs bill that AFIP claims they owe.

AFIP and exporters have been at loggerheads for a couple of years. The Argentine government alleges multinational trading companies, including Bunge and Cargill, have been avoiding local taxes by billing shipments through Uruguay and suspended the registration of a number of firms.

Farm groups, including the Argentine Rural Society (SRA), have spoken out against the new tighter customs procedures, mindful that the increased costs will simply be passed on to farmgate prices, as has the president of Paraguay, which is also seeing its shipments delayed because of the measures.

The backdrop to this story is the recent deterioration of the Argentine economy. The government needs all the dollars it can lay its hands on in its vain attempt to maintain the value of the peso and cover government spending.

It seems to be fighting a losing battle -- the black market exchange rate currently stands 50% higher than the official rate -- but has not given up.

One stopgap solution has been to delay VAT (value added tax) refunds to exporters on grain shipments, which should take 60 days, but currently stretches out over four to five months.

But this is a drop in the ocean for the government, which is seeing farm revenues decline because producers are storing soybeans. They are doing this in belief that the current economic situation is unsustainable and the soybeans offer a natural hedge to any further devaluation of the peso or confiscation of savings that may lie ahead.

Late last year Internal Trade Secretary Guillermo Moreno, President Cristina Fernandez's super minister, berated farmers for retaining three million metric tons of soybeans from the 2011-12 crop. That's a problem for the government because they levy a 40% export tax on all soybean exports -- an extremely important revenue source.

Farmers also aren't keen to sell the next crop. Forward sales of 2012-13 soybeans total just 5 mmt, or less than 10% of the projected crop. Normally, the percentage is closer to 50%, but farmers are unwilling to commit product in such an uncertain environment.

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